CRITICAL THINKING

TASK

After my team submitted our round one decisions, we waited for our results in the Capstone Courier. Once the Capstone Courier came out, I viewed our round one results and I immediately noticed that my team required a $25,789,018 emergency loan from Big Al. I realized that this loan was primarily due to high inventory carrying costs since, among our products collectively, there were over 1600 units in storage. I believe that if my team and I practiced critical thinking skills more, we could have better understood the errors in our marketing and production decisions, which had a direct influence on the abundance of inventory we had on hand. ​

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MY ACTIONS

Prior to the results of round one and the emergency loan received, my group and I came into round one with the goal of being aggressive competitors at the outset. Therefore, in round one we capitalized on capturing most of the market share in the low-end and traditional segments, as they collectively made up about 70% of our industry’s market share. On our traditional product we spent $1.8M and $3.0M on promo and sales, and for our low-end product we spent $1.84M and $1.0M on promo and sales. While I thought this was a large spending budget, if I evaluated this decision more critically, I would have realized that these budgets were fairly conservative relative to our top competitor in the practice round, Baldwin, who spent at least $2.0M and $2.5M for promo and sales for both their traditional and low-end products. If I thoroughly assessed the amount of investment our competitors put into their departments, our team could have had a better idea of how our marketing decisions would fair in comparison to our competition. Additionally, if I identified the high significance of marketing on market share, my team could have spent more on these budgets to aggressively increase our customer awareness and accessibility (refer to figure 1). Since I believed we spend a high budget in marketing, I forecasted a high demand for these products, which lead to a high production schedule. For low-end and traditional, we respectively produced 2000 units and 1900 units for each segment. I forecasted too high for the traditional market and we had 844 units on hand. However, if I calculated our units produced versus units demanded for the traditional market, I would have known we predicted to obtain 25% of the market if we sold all 2000 units, which was very unrealistic, especially considering our lower marketing budget, and that our new product would not be sold until the end of May, practically halfway through the year. Since these projections were very high risk and contingent on our competitors unknown decisions, I should have suggested that we take either reduce our production schedule or increase our long-term loan (refer to figure 2). 

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RESULTS

Due to my lack of critical thinking on the potential errors in our decisions, our team incurred a large emergency loan of current debt. If I reflected more on the connections between the marketing and production markets, I would have realized the relationship between the lack of investment in marketing and the overestimated production schedule to our high inventory at the end of round one. Despite my team’s failure to be financially secure in round one, I learned a lot from the errors in our thinking and methodology. Moving forward, I will be sure to think more critically about the actions of our competitors and the consequences of our decisions on our finances.

Critical thinking allows individuals to see the connections between ideas, justify their decisions, and understand the consequences of their actions.

Figure 1: Once the Capstone Courier came out for round one, my group and I discussed the results of our sales and promo budgets.

Figure 2: Once round one was over, I recorded our team's compiled notes on what we did wrong, what we did well, and suggestions for handling production and marketing moving forward.