Volume 1, Number 3 December 31,
2003
Recent Events:
New products, markets and strategies abound in Industry C. Four of the five companies saw their stock
prices go up, as new markets opened in Europe and the high-quality Product Z
appeared in every market. Plan Z with an everything-everywhere strategy
captured large gains in the stock market, but not quite as much as IBCo, who made a
terrific comeback in 2003, and now leads the pack. With all this expansion, there will no doubt be long strategy
meetings in the board rooms before the 2004 season begins.
IBCo stayed with their tried and true prices in
the Western market while increasing their investment in sales and advertising,
and managed to double their market share in both X and Y. In the larger Eastern market, they raised
everything, prices, sales and advertising…and it paid off with market gains in
both products. IBCo
now
sits on the largest pile of cash in the industry, and ranks highest on the
quality/awareness scale. One wonders
why they invest so heavily in the quality of their low-quality product, but
maybe they know something we don’t. IBCo is the only
company with a AAA rating, and now that the European market is open, and two
companies are making Product Z, we don’t expect them to be resting on their
laurels.
Other than pulling their Product X out of the Western market, Plan
Z
was everywhere in 2003. With a name
like Plan Z it’s no surprise that they introduced their new Product Z to the market. As planning would have it, they had all of
Europe to themselves, selling all three products to a somewhat captive
audience. Of course, analysts don’t
expect this to last, but Plan Z definitely has first mover advantage here,
and others will have to play hard to catch them. Strangely Plan
Z,
continues to refuse to spend advertising money on Product X in the East, and
their market share fell dramatically in 2003.
They are well positioned for 2004 with added capacity and Q/A
recognition.
GOODTMZ maintained their market share of Product X in
the West, gaining slightly on total sales, but as overall demand for Product X
in the East declined, a stable market share meant a loss of sales for GOODTMZ. Modest gains in revenues were not enough to
offset another year of red ink. With
the industry expanding in so many directions, analysts note that GOODTMZ begins the 2004
season with the lowest capacity in the industry, and worry that GOODTMZ hasn’t a solid
footing to compete. Once again, GOODTMZ
had
the tightest credit terms for their customers.
They are the only company with an operating loss this year, but they
have had one consistently every year.
Their operating loss almost certainly reflects a neglect of process
improvement expenditures.
AWEmine saw modest gains in 2003, but left everyone
wondering what happened after such a great year in 2002. Things change. In the Eastern market, AWEmine took a hit
on its share of Product Y, raising prices to the sector’s highest, and losing
market share. AWEmine ended the year
with the industry’s largest inventory on its shelves, and a matching
overdraft. Their Q/A Index rating
dropped 8 points last year and their credit went from BBB to BB. On the upside, AWEmine enters 2004 with
the industry’s highest capacity, and given all the new markets, they should be
well positioned to compete.
SAD did some serious planning in 2003, and got
back in the race. Their new Product Z
was a hit, though Plan Z edged them out slightly in both markets. Rumor has it that the competing marketing
departments have lunch together—they matched prices and advertising almost line
for line. Great minds… Overall, SAD has improved its
position: revenues are up, losses are down, but they still finished the year
with inventory on the shelves and a larger overdraft. Believing that SAD is getting it together and can push that
stuff out the door next year, investors bought into the new strategy and
elevated stocks by $1.54 per share.