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FINAL BUSINESS PLAN (1)

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FINAL BUSINESS PLAN (1)

  1. 1.           Andrews Corporation Business Plan               BUSI  20173,  Section  074   Texas  Christian  University   Contributors:  Blake  Crowley,  Laura  Frazier,  Mackenzie  Hall,  Hannie   Tran,  Sydney  Wood  
  2. 2. 2     Table of Contents   I.  Executive  Summary…………………………………………………………………….  3   II.  Company  Description…………………………………………………………………  4   III.  Market  Analysis………………………………………………………………………..  6   IV.  Products  and  Services……………………………………………………………….  8   V.  Strategy  and  Implementation  Summary…………………………………….  9   VI.  Financial  Plan……………………………………………………………………………  11                      
  3. 3. 3     Executive Summary Since  the  beginning,  Andrews  Corporation  has  been  serving  both  the  low  and  high  tech  markets   of  the  sensor  industry.  We  distinguish  ourselves  from  competitors  by  creating  cutting  edge  high   tech  sensors  and  allowing  them  to  mature  into  the  low  tech  segment.  Using  affordable  pricing,   embracing  change  and  aiming  for  innovation,  we  hope  to  be  at  the  forefront  of  both  low  and   high   tech   segments.   We   value   customer   relationships   and   ensure   that   our   customers   are   receiving  their  ideal  product  from  a  company  they  know  and  trust.     We  currently  produce  Able,  a  sensor  that  was  introduced  into  the  high  tech  segment,  but  is   maturing  into  the  low  tech  segment.  As  Able  exits  in  high  tech,  we  plan  on  introducing  a  new   sensor,   Alpha,   to   retain   high   tech   sensors.   As   each   sensor   we   produce   matures,   it   will   eventually   need   to   be   phased   out,   however,   we   will   continue   to   introduce   new   high   tech   products  to  compensate  for  our  maturing  sensors.  Many  of  our  competitors  have  a  focus  in  the   low  tech  segment,  allowing  our  strategy  to  dominate  the  high  tech  segment.  By  the  time  our   products  have  moved  into  the  low  tech  segment,  they  will  be  at  the  perfect  age  and  have  the   positioning  to  appeal  to  this  segment.     Upon  their  introduction,  our  sensors  will  have  a  higher  price  due  to  the  research  and  material   costs  of  cutting  edge  technology.  However,  as  the  sensor  moves  into  the  low  tech  segment,   price  will  decrease  in  order  to  appeal  to  low  tech  buyers.  We  plan  on  driving  awareness  so  that   customers  know  about  our  products  and  will  invest  heavily  in  accessibility  in  order  to  be  leaders   in  customer  service.  With  such  high  demand  for  our  products,  we  plain  on  avoiding  stock  outs   by  investing  in  capacity.  In  doing  so,  we  also  hope  to  lower  increased  costs  due  to  second  shift   production.     In  order  to  raise  capital  for  R&D,  Marketing,  and  Production  we  plan  on  using  long-­‐term  debt  as   the  primary  source  of  raising  capital  and  issuing  stock  as  a  secondary.  Because  of  low  interest   rates,  long  term  maturity,  and  the  ability  to  retain  majority  ownership  of  the  company,  long   term  debt  is  the  most  effective  way  of  raising  capital  for  our  company.  However,  if  we  need  to   raise  additional  capital  we  will  issue  stock.  Also,  since  we  phased  out  our  Acme  sensor  we  had   an  initial  influx  in  capital  from  factory  liquidation.  At  Andrews  we  strive  to  make  the  best   sensors  in  the  market,  which  means  we  will  heavily  rely  on  reinvesting  our  profits  back  into  the   development  of  our  sensors.  This  means  that  we  are  going  to  keep  our  cash  reserves  under  3%   and  will  not  give  out  dividends  to  our  stock  holders.  However,  we  believe  that  our  performance   will  cause  us  to  have  the  highest  stock  price,  which  will  make  up  for  not  giving  dividends  to  our   shareholders.  Finally,  we  are  going  to  use  stock  price,  profits,  and  market  share  to  accurately   gauge  our  performance.        
  4. 4. 4     Company Description Andrews  Corporation  is  a  sensor  company  in  the  business-­‐to-­‐business  market  that  manufactures  and   sells   electronic   sensors.   We   were   formed   in   2014   when   the   government   split   an   existing   sensor   monopoly  into  smaller  companies.  When  this  happened,  the  Andrews  Corporation  became  one  of  the   first   leading   sensor   companies   in   the   emerging   market.   Sensors   play   a   key   role   in   the   technological   world  and  have  been  implemented  in  a  variety  of  industries  such  as  airlines,  smart  phones  and  power   generation.  By  understanding  the  demands  of  not  only  high  quality  but  also  price  competitive  sensors,   we   aim   to   operate   in   both   the   high   tech   and   low   tech   markets.   Cutting   edge   technology   and   ideal   positioning  focus  will  distinguish  Andrews’  products  from  other  competitors  in  the  niche  market.  We  will   make  investing  in  the  promotion  and  sales  budgets  of  our  sensors  a  top  priority  in  order  to  maintain   high   customer   awareness   and   accessibility,   because   we   believe   our   products   meet   and   exceed   our   customer’s   expectations.   This   strategy   requires   a   dedicated   team   to   follow   a   vision   and   mission   statement  set  in  stone  by  the  management  team.  This  establishes  what  we  value  as  a  company  and   guides  our  company’s  direction  and  ultimate  purpose.  It  has  been  shown  that  companies  who  have  a   vision   statement   stand   apart   as   the   best   and   most   exceptional   because   vision   statements   give   companies  a  clear  picture  of  what  their  businesses  should  and  could  be.  As  a  new  company,  we  have   realized  the  importance  of  a  clearly-­‐defined  vision  in  supporting  our  success  now  and  in  the  future.  With   this  in  mind,  we  created  of  our  potential  vision,  mission  and  values:   Vision:  At  Andrews  Corporation  we  strive  to  serve  the  needs  of  our  customers  by  providing  a  variety  of   effective  sensor  options  through  developing  cutting  edge  sensors  that  mature  into  reliable  products.  We   aim  to  be  at  the  forefront  of  both  low  and  high  tech  industries,  leading  in  affordable  pricing  while  also   keeping  a  competitive  advantage  by  embracing  change  and  aiming  for  innovation.   Mission:  Andrews  Corporation  provides  high  tech  customers  with  cutting  edge  technology  and  low  tech   customers   with   proven   reliability.   We   add   value   to   our   products   by   meeting   customer   needs   and   maintaining  reasonable  prices.   Values:  We  value  affordability,  innovation,  commitment,  integrity,  and  sustainability.  These  are  the  core   values  that  we  aspire  to  embody  in  the  workplace  to  help  ensure  that  our  employees  feel  inspired  and   that  our  company  has  sense  of  purpose.   We   believe   that   our   vision,   mission,   and   values   will   become   an   essential   aspect   of   our   company’s   potential  to  succeed.   Andrews   Corporation   aims   to   maximize   profits   by   valuing   the   relationships   with   our   customers   and   focusing  on  Research  and  Development  to  ensure  our  products  make  the  “fine  cut”  with  our  customer’s   preferences.  We  strive  to  fight  against  stock  out,  stagnation  and  malpractice.  We  will  have  a  dynamic   team  of  engineers  and  customer  support  representatives  who  will  serve  at  the  front  line  to  assist,  train   and   support   any   businesses   who   need   assistance   with   the   implementation   and   application   of   our   sensors.    
  5. 5. 5       SWOT  Analysis                                       Internal   Strengths   .  High  sales  and  promo`on  budget   to  maintain  high  awareness  and   accessibility   .  Talents  aarac`on  with  good   insurance  plan  and  benefits   .  Customer  centric     .  Cucng  edge  knowledge   .  Operate  in  both  high  and  low   tech  market   .  Focus  in  innova`on  and  efficiency   .  Fast  reac`on  to  market  changes     Weaknesses   .  Error  in  calcula`on  of   product  posi`oning   .  Error  in  forecas`ng  posing   risk  of  stock  out  and  lef  over   inventory   .  Managing  budgets  and   balancing  financials   .  Bad  inflow  of  cash     .  High  carrying  cost   .  Long  adjusment  `me   External   Opportuni>es   .  Markets  grow  at  a  high  rate.   high  tech:  20%  and  low  tech:   10%   .  Technology  evolves  boos`ng   customer's  interest   .  The  collapse  of  monopoly   market   .  Equal  opportuni`es  for  all  of   the  entering  companies   .  Sensors  are  ubiquitous   .  The  increase  in  demand  for   sensors   Threats   .  Risk  from  compe``on   .  Risk  from  government's  law   and  regula`on   .  Cost  advantage  of   compe`tors   .  Compe`ng  and  ideal   products  from  compe`tors   .  Market  constant  changes   .  Customer's  expecta`ons   change  fast  
  6. 6. 6     Market Analysis Facts  about  the  industry   Andrews  Corporation  is  operating  in  a  business-­‐to-­‐business  market.  Our  company  sells  its  sensors  to   other  companies  to  be  used  in  their  products  which  are  then  sold  to  consumers.  Sensors  can  be  used  in   a  variety  of  areas  such  as  security,  aeronautics  and  biomedical  engineering,  creating  a  high  demand  for   sensors  across  an  array  industries.  As  technology  becomes  society’s  norm,  more  and  more  products  are   going   to   require   sensors.   The   already   high   and   increasing   demand   for   sensors   creates   the   perfect   opportunity  for  Andrews  Corporation  to  grow  and  expand  its  company.   Technology   grows   more   advanced   every   single   day   which   means   the   sensor   industry   is   constantly   evolving.  A  cell  phone  uses  dozens  of  sensors,  and  as  they  become  more  advanced  consumers  will  begin   to  expect  more  from  their  phones.  This  means  that  sensors  will  have  to  be  much  more  advanced  than   they  are  today.  For  this  reason,  we  anticipate  that  the  high  tech  consumer’s  expectations  will  increase   each   year,   demanding   smaller   and   higher   performing   sensors.   To   satisfy   these   demands,   Andrews   Corporation  is  creating  new  high  tech  sensors  with  cutting  edge  technology  every  two  to  three  years  to   keep   up   with   advancing   technology.   However,   we   recognize   that   not   every   consumer   wants   cutting   edge,  which  is  why  we  focus  on  the  entire  lifecycle  of  our  products.  Low  tech  consumers  want  sensors   with   proven   reliability.   After   we   introduce   our   high   tech   sensors   to   the   market   we   allow   high   tech   demands  to  continue  to  move  towards  more  advanced  improvements  while  our  sensors  mature  into  the   low  tech  segment.  By  the  time  our  sensors  have  reached  this  segment  they  have  proven  their  reliability   to  low  tech  consumers.   However,   as   technology   advances,   high   tech   customers   will   demand   greater   improvements   than   low   tech  customers,  causing  segment  demands  to  shift  at  different  rates.  Over  a  long  period  of  time  the  low   and  high  tech  segments  will  drift  apart  and  isolate  themselves  from  one  another.  With  more  stratified   consumer  demands,  it  will  become  more  difficult  for  our  sensors  to  drift  from  the  high  tech  to  low  tech   segments.  Recognizing  this  potential,  Andrews  Corporation  has  decided  that  as  our  high  tech  sensors   drift,  we  will  make  modifications  to  the  sensors  that  will  meet  the  demands  of  our  low  tech  consumers.   Market  segmentation   With  a  focus  on  the  entire  lifecycle  of  our  products,  Andrews  Corporation  competes  in  both  the  high  and   low  tech  segments  of  the  sensor  market.  Total  demand  in  the  sensor  industry  is  10,440,000  units.  At  the   end  of  2018,  demand  in  the  low  tech  market  was  6,708,000  and  demand  in  the  high  tech  market  was   3,732,000.     In  the  low  tech  segment,  unit  demand  was  at  5,040,000  units  at  the  end  of  2015  and  has  increased  10%   each   year,   reaching   6,708,000   units   by   the   end   of   2018.   This   is   promising   for   Andrews   Corporation   because  by  the  time  out  high  tech  sensors  mature  into  low  tech  sensors,  there  will  be  more  customers   for  our  company  to  sell  its  product  to.  In  the  high  tech  segment  unit  demand  has  increased  20%  each  
  7. 7. 7     year  from  2,160,000  in  2015  to  3,732,000  in  2018.  This  growth  also  represents  an  increase  in  potential   customers  as  we  introduce  new  high  tech  sensors  into  the  market.  Because  the  high  tech  segment  is   growing  at  a  faster  rate  than  the  low  tech  segment,  the  industry  is  slowly  shifting  more  towards  high   tech.  In  2015  70%  of  sensor  sales  were  in  the  low  tech  segment  with  30%  of  sales  in  the  high  tech  sector.   By  2015  those  percentages  had  shifted  slightly  with  only  64.3%  of  sales  in  the  low  tech  segment  and   35.8%  of  sales  in  the  high  tech  segment.  While  a  majority  of  sales  are  still  in  the  low  tech  segment,  over   time  high  tech  sales  will  eventually  surpass  low  tech  sales.  Andrews  Corporation  will  keep  this  in  mind   when  determining  how  much  of  each  sensor  to  produce.         The  growth  that  each  segment  is  experiencing  is  a  result  of  changing  customer  preferences.  The  high   tech   segment   is   demanding   smaller   and   faster   products   every   year.   In   2015,   high   tech   consumers   wanted  a  performance  level  of  7.4  and  a  size  of  12.6.  Between  2015  and  2018  performance  expectations   increased   2.1   to   9.5   and   size   expectations   decreased   2.1   to   10.5.   This   means   that   performance   expectations  are  increasing  an  average  of  0.7  per  year  and  size  expectations  are  decreasing  an  average   of  0.7  per  year.  This  information  is  extremely  relevant  when  deciding  to  introduce  new  high  tech  sensors   to  the  market.  New  sensors  are  in  Research  and  Development  one  to  two  years.  Knowing  the  rate  at   which  customer  preferences  move  allows  our  R&D  department  to  create  the  new  sensors  that  will  meet   our  customers’  demands  when  they  hit  the  market.     The  low  tech  segment  is  also  demanding  faster  and  smaller  sensors,  but  at  a  much  slower  rate  than  the   high  tech  segment.  In  2015  low  tech  customers  wanted  a  performance  level  of  4.8  and  a  size  of  15.2.  By   the  end  of  2018  performance  expectations  had  increased  1.5  to  a  level  of  6.3  and  size  expectations  had   decreased  to  13.7.  Based  on  this  information,  Andrews  Corporation  has  concluded  that  the  performance   expectations  for  the  low  tech  segment  increase  at  a  rate  of  0.5  per  year  while  size  expectations  decrease   at  a  rate  of  0.5  per  year.  This  information  allows  our  R&D  department  to  make  the  proper  modifications   to  our  sensors  in  order  to  satisfy  our  customers’  demands  as  they  mature  into  low  tech  sensors.   Low Tech 64.24% High Tech 35.76% Segment Unit Sales
  8. 8. 8     Andrews   Corporation   currently   holds   22%   of   the   high   tech   market   and   0%   of   the   low   tech   market.   However,   as   our   high   tech   sensors   mature   into   low   tech   sensors   and   we   introduce   new   high   tech   sensors,  we  anticipate  holding  25%  of  the  high-­‐tech  market  and  20%  of  the  low  tech  market.     Andrews  Corporation  is  competing  against  five  other  companies.  Eerie  appears  to  be  focusing  on  low   tech  sensors,  leaving  its  share  of  the  high  tech  segment  available  to  competitors,  while  Ferris  seems  to   be   focusing   on   the   high   tech   segment,   leaving   its   portion   of   low   tech   customers   available   to   competitors.     Baldwin  and  Digby  are  competing  in  both  low  and  high  tech  segments  with  differentiator  strategy.  Both   companies  are  revising  their  products  each  year  in  an  effort  to  keep  their  designs  fresh.  Chester  is  also   competing  in  both  segments  but  is  using  a  cost  leader  strategy,  pricing  its  products  competitively  within   each  segment.     Products and Services Current  Products     At  Andrew’s,  we  currently  offer  one  high  tech  sensor,  Able,  and  are  excited  about  the  introduction  of  an   additional  high  tech  sensor,  Alpha,  in  the  upcoming  year.  Although  Able  was  introduced  in  the  high  tech   industry,  it  is  sold  in  both  low  and  high  tech  segments.     Andrews 8.60% Baldwin 24.20% Chester 19.50% Digby 21.50% Eerie 17.00% Ferris 9.20% Total Market Share
  9. 9. 9     New  Production     In  past  years  we  produced  a  low  tech  sensor  called  Acme  but  we  soon  realized  it  was  in  the  best  interest   of  the  company’s  future  to  phase  out  Acme  and  have  Able  gradually  fill  its  spot  in  the  low  tech  industry.   In  our  mission  statement,  we  have  highlighted  our  goal  of  being  at  the  forefront  of  both  the  high  tech   and  low  tech  industries.  After  phasing  out  Acme,  we  put  our  focus  on  aging  Able  to  appeal  to  the  low   tech  industry  and  will  have  Alpha  dominate  the  high  tech  industry.     Although  we  currently  operate  with  a  sole  focus  on  high  tech  sensors,  we  are  aware  of  the  need  and   desire  for  low  tech  sensors  as  well.  Therefore,  we  plan  to  let  Able  age  into  a  low  tech  sensor  once  Alpha   is  introduced,  with  Alpha  remaining  a  high  tech  sensor.  Our  company  envisions  a  system  of  constantly   introducing  new  high  tech  sensors  to  replace  the  current  one  in  that  industry  and  in  return  allowing  the   replaced  sensor  to  age  and  fall  into  the  low  tech  industry.     Once  each  new  high  tech  sensor  is  introduced,  the  low  tech  sensor  at  the  time  will  be  phased  out  and   replaced.  Our  research  and  development  team  will  continually  be  inventing  new  products  and  working   to  improve  current  sensors.   Technology     By   inventing   and   producing   new   high   tech   products   every   couple   of   years,   we   will   appeal   to   the   numerous  clients  in  this  segment  who  are  interested  in  having  the  newest  forms  of  technology.  Alpha,   along  with  each  new  high  tech  sensor  introduced,  will  be  aimed  at  the  lower  right  hand  corner  of  the   perceptual  map  which  consists  of  the  newest  technological  advancements,  creating  high  demand  for   these  new  sensors.  Andrews  believes  that  as  a  corporation,  it  is  beneficial  to  appeal  to  both  customers   in  the  low  and  high  tech  industries.  When  Able  transitions  to  a  low  tech  sensor  it  will  mean  lower  prices   for  this  sensor,  attracting  customers  who  are  not  willing  to  pay  for  our  other  sensors.     Competitive  Comparison     Most   of   Andrews’   competition   has   a   majority   of   their   sales   in   the   low   tech   segment,   with   a   few   exceptions.   Since   we   plan   on   continually   introducing   new   high   tech   sensors,   we   will   dominate   the   industry,  providing  the  newest  technology  that  consumers  desire.  By  placing  Alpha  at  the  lower  right   corner  of  the  perceptual  map,  we  will  have  the  advantage  over  our  competitors.  On  the  other  hand,  our   placement  in  the  low  tech  segment  will  be  successful  because  our  sensors  that  eventually  move  into  this   segment  will  embody  the  age  that  low  tech  consumers  desire  at  the  low  price  that  they  are  willing  to   pay.       Strategy and Implementation Summary Marketing  –  Pricing  Strategy   Our  current  sensor  Able  appeals  to  the  high  tech  market,  but  in  order  for  our  vision  of  being  a  sensor   company  that  appeals  to  both  high  and  low  tech  markets  to  be  realized,  we  plan  on  allowing  Able  to   mature  through  the  years  into  a  low  tech  sensor.  Until  then,  Able  is  currently  priced  at  $38  which  is  in  
  10. 10. 10     the  ideal  price  range  of  $25  to  $45  for  high  tech  customers.  Next  year,  when  our  new  and  innovative   Alpha  sensor  is  introduced  into  the  market,  we  will  begin  the  process  of  transitioning  Able  from  high   tech  to  low  tech  by  dropping  the  price  to  $34,  which  falls  between  the  low  tech  preferred  price  of  $15  to   $35.  We  plan  on  pricing  Alpha  at  $45  once  it  becomes  available  and  though  this  is  a  steeper  price,  we   believe  that  Alpha  will  be  at  the  very  forefront  of  the  high  tech  sector,  making  the  high  price  worth  the   innovation  that  our  high  tech  customers  crave.  As  our  sensors  go  through  the  lifecycle  of  high  tech  to   low  tech,  our  prices  will  evolve  with  the  sensors  from  the  higher  prices  that  high  tech  customers  are   willing  to  pay,  to  the  lower  prices  that  keep  low  tech  customers  happy.     Promotion  and  Sales  Strategy   When  we  first  started  out  as  a  company,  we  did  not  initially  invest  as  much  money  as  we  could  have  into   our   promotion   and   selling   tactics.   However,   we   have   recently   turned   this   around   by   maximizing   our   promotion  and  sales  budgets  for  Able,  spending  $3,000,000  for  promotion  and  $4,000,000  for  sales.  This   decision   paid   off,   because   we   are   currently   this   year’s   top   high   tech   sensor   –   having   the   highest   awareness  (91%  of  our  potential  customers  for  Able  know  it  exists),  accessibility  (56%  of  our  customers   find  it  easy  to  work  with  us),  and  customer  satisfaction  survey  score  amongst  all  the  other  high  tech   sensors  in  the  industry.  We  are  proud  of  our  industry-­‐leading  91%  awareness  and  strive  to  keep  our   customer  awareness  at  or  above  90%.  To  keep  our  momentum  in  awareness  and  accessibility,  next  year   we   will   spend   $1,500,000   on   promotion   to   simply   maintain   our   high   awareness   and   spend   the   peak   beneficial  amount  of  $3,000,000  on  sales.  With  our  promotion  expenditures  we  will  continue  to  drive   our   awareness   in   order   to   effectively   persuade   customers   to   choose   our   sensors.   With   our   sales   expenditures,   we   will   drive   our   accessibility   so   that   we   can   efficiently   close   the   deal   through   our   salesforce  and  distribution  channels.  Ultimately,  when  we  invest  in  accessibility,  we  invest  in  customer   service.  This  is  an  important  factor  for  us  because  at  Andrews  Corporation,  we  value  building  strong   relationships  with  our  customers.     Sales  Forecast:  
  11. 11. 11         Production   Our  strategy  of  exploiting  niche  markets  and  attracting  potential  customers  led  us  to  to  introduce  Able,   our  first  product,  as  a  high  tech  sensor.  As  mentioned  above,  we  have  been  focusing  on  investing  in   promotion  and  sales  in  order  to  obtain  a  high,  industry-­‐leading  percentage  of  customer  awareness  and   accessibility.  When  we  invest  in  the  sales  budget,  it  will  contribute  to  the  segment  accessibility.  This  will   help  us  raise  accessibility  in  both  markets  and  save  a  significant  amount  of  cost.  Therefore,  even  though   Able  is  a  high  tech  sensor,  it  enables  us  to  earn  market  shares  in  the  low  tech  market  and  earn  additional   profits  from  both  markets.   After  Able,  we  will  introduce  our  new  product  Alpha  as  targeting  the  high  tech  market  and  will  optimize   the   ideal   position   the   month   it   will   be   released   to   earn   the   most   revenue.   We   aim   to   take   a   high   contribution  margin  and  profit  margin  to  make  up  for  the  volume  of  sales  as  our  strategy  to  earn  as   much  cash  as  possible.  We  will  let  the  aging  product  mature  into  the  low  tech  market  and  revise  it  into  a   reliable  sensor  to  meet  this  segment’s  customer  expectations  and  use  a  high  volume  of  sales  to  earn   revenue  as  a  strategy.     Investing  in  production  will  be  our  next  concern  when  we  already  have  a  large  amount  of  cash  resulting   from  selling  Able  and  doing  financials.  Our  goal  is  to  provide  enough  capacity  to  meet  the  demand  of   each   market   to   gain   the   maximum   profit   and   avoid   stock   out.   We   plan   to   increase   in   capacity   and   automation   in   order   to   maximize   production   and   minimize   labor   cost.   This   will   allow   us   to   avoid   overtime  which  will  also  result  in  reducing  labor  cost.     We   will   have   to   focus   on   training   and   recruiting   well-­‐qualified   employees   once   we   have   new   and   improved   machinery   and   processes   in   place.   However,   our   strategy   is   to   use   automation   mainly   to   reduce  the  dependence  on  human  labor  and  diversify  the  risk.  Therefore,  as  the  years  go  by,  we  will  
  12. 12. 12     invest  in  TQM  in  order  to  reduce  the  adjustment  time  in  R&D  for  an  existing  product  when  we  have  a   high  automation  level.   Andrews  Corporation  already  phased  out  Acme,  one  of  our  low  tech  sensors,  because  it  was  costly  to   produce  and  didn’t  bring  profit  to  the  company.  We  will  consider  liquidating  any  product  line  that  is  no   longer  bringing  profit  to  the  company.  When  we  phase  out  a  product,  we  will  leave  at  least  one  unit  left   in  order  to  be  able  to  sell  the  product  at  full  price  instead  of  half  price.     Financial Plan Financial  Assumptions   Andrews   Corporation   plans   to   use   long-­‐term   debt   as   the   primary   option   and   issuing   stock   as   the   secondary  option  to  raise  capital.  Long-­‐term  debt  gives  our  company  three  distinct  advantages  over  any   other  capital  raising  methods.  First,  long-­‐term  debt  provides  our  company  with  the  necessary  amount  of   capital  needed  to  develop  our  products,  while  giving  up  no  ownership  share  company.  This  is  important   because  it  gives  our  company  more  control  over  operations  in  the  future.  Second,  the  ten-­‐year  maturity   on  the  long-­‐term  bonds  gives  our  company  time  to  start  generating  substantial  profit  margins.  By  giving   our   company   ten   years,   we   will   be   able   to   use   the   money   to   develop   brand   new   high   and   low   tech   sensors  that  will  increase  our  profit  margins.  Third,  we  are  predicting  that  our  new  products  successes   will  help  bring  up  our  bond  rating  and  drive  down  our  interest  rate.  By  doing  this,  long-­‐term  debt  will  be   the  cheapest  method  to  finance  projects.  Currently,  Andrews  has  a  bond  rating  of  C,  but  by  introducing   our   new   Alpha   sensor,   our   profit   margins   should   rise   over   the   long   term   and   interest   should   fall.   Although  long-­‐term  debt  will  be  at  the  forefront  of  raising  capital,  we  will  also  issue  stock  in  times  where   we  need  additional  capital.  For  the  next  few  years  we  will  not  be  issuing  any  stock  because  of  how  low   our  stock  price  is  currently.  Our  stock  price  is  $1  per  share  right  now  and  we  do  not  plan  to  issue  stock   till  we  are  at  least  at  $11  per  share.  We  believe  the  phasing  out  of  our  Acme  sensor  is  what  caused  our   stock  price  to  drop,  but  we  predict  that  our  stock  price  will  raise  to  its  previous  level  with  the  release  of   our   new   Alpha   sensor.   When   our   stock   price   rises   back   to   its   previous   level,   issuing   stock   will   be   a   valuable   tool   because   it   will   help   our   company   raise   extra   funds   to   either   develop   new   products   or   drastically  overhaul  a  current  product.     Another  way  in  which  we  are  going  to  raise  capital  in  the  short  term  is  through  factory  liquidation.  Since   we  have  decided  to  phase  out  our  Acme  sensor,  we  plan  to  get  to  get  a  short  term  boost  in  capital  as  we   liquidate  the  sensors  and  the  factory  capacity.  Also,  in  the  future  we  will  not  hesitate  to  phase  out  a   product  if  it  is  not  performing  to  our  standards.  We  believe  that  our  sensors  will  be  able  to  cater  to  our   consumer’s  wide  range  of  needs  and  if  our  sensors  do  not  reach  that  standard,  we  will  liquidate  them   for  extra  capital.     Andrews  Corporation  is  determined  to  be  the  best  sensor  company  industry  and  one  of  the  ways  we  are   going  to  achieve  this  is  by  being  very  aggressive  with  our  investment  strategy.  We  plan  on  keeping  less   than  3%  of  our  cash  in  reserves,  meaning  that  any  dollar  not  being  put  into  reserves  will  be  invested   right  back  into  the  company.  This  will  give  our  company  a  competitive  advantage  over  other  companies  
  13. 13. 13     because  we  will  have  more  capital  being  invested  into  the  development  our  projects,  thus  they  will  be   better   tailored   towards   the   needs   of   the   customers.   The   only   time   we   would   choose   to   hold   a   substantial  cash  reserve  is  if  we  were  planning  to  phase  out  a  product.  This  will  ensure  that  we  do  not   see  the  same  results  when  we  phased  out  Acme,  where  our  stock  price  plummeted  because  we  had  to   take  out  an  emergency  loan.     Our  aggressive  investment  strategy  extends  to  how  much  we  pay  our  shareholders  for  dividends.    Since   we   are   committed   to   making   the   highest   quality   sensors,   we   will   not   be   giving   out   dividends   to   our   shareholders  because  we  want  to  use  a  majority  of  our  profits  to  reinvest  in  our  products.  This  will  help   our  company  build  better  products  and  will  help  our  company  capture  a  majority  of  the  market  share.  If   we  are  able  to  increase  our  market  share  and  profits,  then  this  will  increase  our  stock  price  which  will   make  shareholders  satisfied,  because  having  a  higher  stock  will  compensate  for  the  fact  that  we  are  not   giving   out   dividends.   However,   there   is   a   circumstance   in   which   dividends   will   be   given   out   to   stock   holders.  If  Andrews  ends  up  controlling  over  one  third  of  the  market  share,  then  the  profits  not  being   reinvested  into  R&D,  marketing,  or  profits  will  be  divided  between  all  the  shareholders.   In  order  to  track  the  financial  progress  of  the  company,  we  are  going  to  use  three  different  financial   indicators,   which   are   stock   price,   profits,   and   market   share.   Stock   price   is   a   valuable   indicator   for   financial   success   because   if   a   companies’   stock   price   is   high,   then   it   shows   people   have   faith   in   the   companies’  direction.  Profit  is  an  excellent  indicator  of  how  a  company  is  doing  because  high  profits   indicate  that  a  company  has  maximized  sales  while  minimizing  variable  costs.  Finally,  market  share  is  the   best  way  to  compare  our  company  to  other  companies  within  our  sector.  If  we  hold  the  most  market   share  out  of  any  company,  then  that  shows  we  are  the  most  successful  sensor  company.         Projected  Profit  and  Loss:  
  14. 14. 14          $-­‐          $20,000.00      $40,000.00      $60,000.00      $80,000.00      $100,000.00      $120,000.00      $140,000.00      $160,000.00     2018  Actual     2019   2020   2021   Sales   (dollars  in  thousands)      $(5,000.00)    $-­‐          $5,000.00      $10,000.00      $15,000.00      $20,000.00      $25,000.00      $30,000.00     2018  Actual     2019   2020   2021   Profit   (dollars  in  thousands)  
  15. 15. 15             2018  Actual   2019   2020   2021   Sales     $34,248.00   $87,487.00   $139,626.00   $140,279.00   Variable  Costs   $26,540.00   $62,534.00   $78,367.00   $78,943.00   Contribution  Margin     $  7,708.00   $24,953.00   $61,259.00   $61,336.00   Total  Period  Costs   $10,572.00   $15,419.00   $18,312.00   $23,475.00   EBIT   $(2,864.00)   $9,534.00   $42,947.00   $37,861.00   Interest   $1,438.42   $1,749.74   $1,396.26   $1,402.79   Taxes   $(1,505.85)   $2,724.49   $14,542.76   $12,760.37   Profit   $(2,796.57)   $5,059.77   $27,007.98   $23,697.84      $(20,000.00)    $-­‐          $20,000.00      $40,000.00      $60,000.00      $80,000.00      $100,000.00      $120,000.00      $140,000.00      $160,000.00     2018  Actual     2019   2020   2021   Sales  and  Profit   (dollars  in  thousands)   Sales     Profit  

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