Business plan 2
Andrews Corporation has made a commitment to make an impact on the rapid advancement of
technology. We want to provide for the companies who have an innovation vision. The
advancement of sensing technology allows these innovators to fulfill their desires. Andrews is a
leading sensor provider that emphasizes the importance of providing highly efficient products that
satisfy our customers’ best interest. The company will target innovation-driven businesses that
have fast-changing interests which is commonly referred to as the high tech market of sensors.
The key to success relies on analyzing the market environment, meeting the target market’s
needs and preferences, and providing the necessary financing for the company to fulfill its goals.
The main strengths of Andrews Corporation include investing in sustainable initiatives that cut
down material costs. Producing high performing sensors results in a high material cost so
decreasing that cost is beneficial for the company. The sustainable initiatives allow the opportunity
for an increase in sales because consumers favor companies who are environmentally friendly.
The company focuses on providing annually refined products that meet the ever-changing
demand of innovative companies. We set our cutting edge sensors at a premium price at which
our target customers are willing to pay. Our ability to craft our sensors to meet our customers’
preferences is what makes them open to our prices.
Provide cutting edge sensors to better the advancement of innovative technology
Our mission is to ensure high quality sensors for innovation-driven companies while meeting our
customers steady changing needs
● Efficiency- Andrews Corporation preaches a structure of efficiency throughout the
company that maximizes profits
Sustainability- We have a commitment to contribute to the sustainable movement and the
effort towards helping the environment
Integrity- At Andrews Corporation, we conduct an honest and trustworthy business to
create an environment in which people feel welcomed
To achieve long term maximum profit goals, Andrews Corporation has decided to sell cuttingedge sensors for a premium price. Our customers are innovative businesses that desire small,
high speed, high performing sensors. They are willing to pay for the high price tag that we sell
our sensors at. We aim to be one of the leading high tech sensor providers in the industry. We
find it imperative that we take on the opportunity to sell to companies that are leading the world
We plan to meet our target market’s preferences by constantly refining our sensors every year.
This consists of sending each sensor through research and development annually so that it can
keep up with the quick-shifting desires of our high tech customers. By refining our sensors, the
age in which our customers perceive them is cut in half each time. Keeping our sensors age as
close to zero is one of our main goals for keeping our products aligned with consumer
preferences. Decreasing the size by .7 centimeters and increasing the performance by .7 mHz
is another adjustment we make to our sensors as they go through research and development.
Catering our sensors around consumer preferences allows up to sell our sensors at the highest
price tag our target consumers are willing to pay which is $45.00.
For our marketing plan, we aim to keep the price of our high performing sensors the same.
Unless there is a dramatic decrease in sales, we should be able to charge a premium price
because our target customers aren’t sensitive to price. For our sales and promotion budgets, we
set them based on how much our customers know about our sensors and how easy it is for
them to use our sensors. We want to pursue 100% in both accessibility and awareness, but the
main goal is to keep them both above 70%. The amount we put into our sales and promotion
budget will be based off if our awareness and accessibility are above or below that 70%.
Andrews Corporation will keep its production schedule 50,000 units more than the sales
forecast. We set this difference to account for any defective sensors and also for potential stock
outs. We will keep automation to a minimum by keeping it at the same rate of Able 3.0
automation and Air 1.0 automation. To be able to refine our sensors every year, we need the
process to be as quick as possible. By increasing automation, that process is slowed down and
we can’t afford that.
In 2017, we financed our capital improvements and research & development expenses by
taking out short term loans. By 2020, we will issue the maximum out of both stocks and bonds
twice. We will use this financing for any future capital improvements. We do not want to be a
highly leveraged company. Andrews Corporation does not like long term debt. We have three
key financial measures that measure our success as a company. They are cash flows, return on
equity and leverage ratio.
Implementing this plan will ensure that Andrews Corporation reaches its long-term goals.
● Investing in Continuous Process
● Sending our sensors
into Research and
● Having access to the United Nations
Environmental Programme Green Programs
year costs are
● Strong company image by being
● Small net profit
● Effective marketing campaigns create
margin in first few
strong brand awareness
years upon releasing
● A simple organizational structure creates
new high tech product
● Accounting for stockouts
● Rapid and steady advance of technology
● Sustainability initiatives have potential to
create an increase in demand
● Potential to capture a larger market share in
the growing high tech market
● Not being able to
keep up with the fastchanging market
● The ever-changing
● An economic
downturn such as a
recession can reduce
From an internal view of Andrews Corporation, one thing we do really well is producing high
quality sensors while also reducing waste and cycle time. When we cut down cycle time, we are
reducing the time required to perform a process to increase productivity. Andrews invests in
Continuous Process Improvement systems to ensure that this improvement of quality and
Having access to the United Nations Environmental Programme Green Program is another
strength of the company. By making this commitment, Andrews has seen a reduction in material
costs. We have also experienced a rise in sales because consumers prefer an environmentally
friendly company. A strong company image is also developed from being an environmentally
friendly company. Many consumers associate our brand image with the betterment of society
Over the years, we have developed a lot of brand awareness through the use of effective
marketing campaigns. Finally, a simple organizational structure creates operational efficiency
for Andrews. Being simplistic allows for communication to run more smoothly throughput the
organizational structure allowing for greater efficiency.
There are some areas in our business that have room for improvement. One of them involves
sending our sensors into Research and Development every year. The cost that it takes to refine
these sensors annually accumulates and can start to become very expensive.
Everytime we develop and release a new high tech sensor, it will result in a small net profit
margin in the first few years upon release. Developing high tech sensors result in both high
material and labor costs. There are times in which the sales from these sensors are less than
what they cost resulting in a negative net profit margin. This is typical for the first few years of a
new high tech product, but overtime it will start accumulating high profits.
It is difficult to calculate stock-outs for new high tech sensors. As a company, our strategy is to
produce the sales forecast to account for potential stockouts. However, if the sales forecast is
miscalculated and it is lower than the actual demand for the sensor a stockout will occur. The
demand for new high tech sensors increases rapidly. Preventing stock outs is something we can
Technology is constantly improving and at a rapid pace. This quick advancement provides more
opportunity for innovative customers to grow and demand more high tech sensors. The increase
in demand is something Andrews Corporation can take advantage of. Technology is always
going to keep on improving so the high tech sensor market is one that will be around for a while.
The sustainability movement is a social movement that gained a lot of ground in the past few
years. Society is searching for a way to do what is best for our environment. Sustainability
initiatives help the cause by allowing companies the opportunity to perform more sustainable
business processes. People like to see that companies care about the environment. As a result,
Andrews may have a potential increase in demand due to our investment in sustainability
The high tech market segment is a fast-changing market. The customers’ preferences change
rapidly. Therefore, we have to constantly change our products to match their desires. If we can’t
make those changes quick enough, it can be seen as an obstacle.
Another potential threat to our company is a low tech competitor switching to the high tech
market segment. This competition will be looking to take some market share which can be seen
as a problem.
Our industry focuses on producing sensors for businesses to incorporate in their products. The
customers are divided into two segments: high tech and low tech. Both of these segments desire
smaller sensors with increasing performance. The low tech market segment focuses on the
reliability and price of sensors. This segment is easily affected by changes in price. If the price is
too high, customers in this segment will find a new producer to buy from. The high tech market
segment focuses on cutting-edge technology as well as the size and speed. The customers’
preferences in this segment change every year. Businesses have to make sure that their sensors
are constantly changing alongside what the customers in the high tech segment want. The sensor
industry is a growth industry in which the high tech market segment has a higher growth rate than
low tech.The growth rates change every year.
Andrews Corporation only sells two high tech sensors so we exclusively operate in the high tech
market segment. The total size of the market segment is 35.8% of the whole industry. The
segment has seen an increase in percentage of the industry from 2017 when the high tech
segment was 30% of the total industry. It is still looking to grow in the upcoming years as the
growth rate remains steady. The current unit demand in the year 2020 is 3,732,000 units. Every
year, the market grows by 20%. Customers in this target market have quick shifting
preferences. They want the sensors in this market to have low perceived age and also be
smaller and faster. Every year Andrews and its competitors aim to meet these changing
consumer preferences by making high tech sensors smaller and faster every year.
In the year 2020, the market share of the segment is distributed as follows:
We only captured 8.7% of the market share in 2020. The reason behind such a low market
share is because we did not produce enough of our newest sensor, Air. The demand for Air is
high and is shown by its customer survey score of 28. We only produced 218,000 units of Air
which ultimately resulted in a stock out. Next year, we plan to up our production of Air to
450,000 units. We believe we will be able to sell most of these units due to Air’s segmentleading performance of 9.7 mHz. Our potential in capturing the increase in demand for our
sensors is shown below.
In terms of potential market share, we see that we have the possibility of making a big jump
from 8.7% market share to 29.8%. Reaching this potential will result in Andrews leading the high
tech market segment by over 7% in market share.
Products and Services
We currently have two high tech sensors: Able and Air. Able has been on the market longer
than AIr which was released in September 2018. In 2020, Able is currently at a performance of
8.9 mHz and size of 10.3 centimeters. We have sold approximately 516,000 units of Able at a
price of $45.00 per unit. Able has played an important role in allowing us to develop and release
Air by consistently bringing in profit; selling at least 500,000 units in the first two years. Air has
a performance of 9.7 mHz and 9.8 centimeters in size. Since this is our newest product, we sold
only 218,000 units at the same price as Able at $45.00. In the future, we believe Air can be a
promising product that has the potential to generate a high net profit margin in the high tech
Andrews Corporation plans on introducing a new high tech sensor when we generate over $10
million in net profit margin for Able and Air combined in a given year. For our two existing
sensors, we will increase their performance by .7 mHz and decrease their size by .7
centimeters. Another important element is the age of our sensors. Since they are high-tech
sensors, we want to keep the age at which our customers perceive the sensors to be, perceived
age, below 2.0. We also want to keep sending our sensors into research and development so
that we can cut the perceived age of each sensor in half. The goal is to reach a perceived age
that is as close to zero as possible. By constantly updating our sensors every year, the demand
for our products goes up.
The reliability of our sensor is adjusted during the first time it is put in research and
development. We call the reliability of our sensors Mean Time Before Failure (MTBF). When we
adjust our mean time before failure, we like to keep it around 21,000-22,000 hours for the next
few years because it will stay within the high tech consumers’’ buying criteria. Currently, Able’s
Mean Time Before Failure is 21,000 hours and Air’s is 22,000 hours. However, this strategy
can increase our material cost, which is $17.78 for Able and $19.35 for Air, since we need
expensive material to produce high tech sensors. Our revenue increases due to the growing
amounts of units sold. If we keep our Mean Time Before Failure the same, our material cost will
soon be covered and we can make more profit out of our sensors. We also do not plan to phase
out any of our sensors in the foreseeable future.
We price both of our sensors,Air and Able, at $45.00. This price is set at the maximum price that
our high tech customers will be willing to buy our sensors at. The reason behind such premium
pricing is due to high tech customers not being sensitive to price. As long as Andrews is
efficient in maintaining size and speed with our high tech customers’ preferences we will capture
10-30% of the market segment. By setting the price at $45.00, we are able to maximize our
profit. Our contribution margin also benefits from the premium price of our sensors. For the year
2020, our contribution margin is at 36%. We would like to reach at least 40% contribution
margin, but that will come as our Air sensor gains more sales. The price will not change in the
near future unless there is a 20% decrease in sales due to price. Our pricing strategy will be the
same for both of our sensors since both products are in the high tech segment.
Promotion Sales and Strategy
For our Able sensor, our promotion budget for 2020 is $1,500,000 and sales budget is
$2,000,000. For Product Air our promotion budget is $1,000,000 and our sales budget is
$1,000,000. We are going to increase the money spent on sales and promotion budgets in the
next few years. For promotion, about a third of the people who knew about a product forget
about it every year. That is why we must maintain how much people know about our sensors,
which is called awareness. To maintain awareness, it takes about $1,400,000 per year. Able
currently has 93% awareness in 2020.Therefore, we will increase our promotion budget for Able
to $1,400,000 each year. As far as Air is concerned, it only has 53% awareness. We will
increase our promotion budget to $2,000,000 next year, but will decrease it in the following year
due to the law of diminishing returns. The goal is to have both sensors over 70% awareness
Accessibility rates the ease it takes to use our sensors. With our sales expenditures we will
maximize our accessibility. Since we have two sensors in the same segment, we will pursue
100% accessibility. In the year 2020, we are spending $1,000,000 on the sales budget for Air
and $2,000,000 for Able. Both sensors have an accessibility of 73%. In the upcoming years, we
will spend $1,500,000 for Air and $1,500,000 for Able.
By capturing at least 70% awareness each year in the high tech segment for Product Able and
Product Air, this will generate the most awareness for our products. Andrews wants to keep
automation to a minimum. By doing automation it takes longer to send our products through
research and development and will delay our process. Andrews plans on keeping over time to a
minimum of 10% to help reduce overtime wage fees. Andrews will invest in quality initiative
training. Andrews will not invest in high-caliber workers because we are only producing 400650 units for each of our two sensors compared to our low-tech competitors who produce 10001300 units for each sensor. In Andrews strategy statement, our company stated that the money
that isn’t used to recruit these high caliber workers will be allocated towards training.
As a leading company in high tech sensors, Andrews Corporations always wants to provide our
customers with the best experience in using our products. Therefore, we will try to maintain the
rate of automation and capacity for the first few years to balance our labor cost around
$12.00/unit. Specifically, automation will be kept the same at 3.0 for Able and 1.0 Air. By opting
to do so, very few changes will be made in the number of employees. Therefore, we will end up
keeping employment rate and salaries around the same as well. Furthermore, it becomes more
difficult to send our sensors through research and development every year if we increase
automation. Since our goal is to refine our sensors as much as possible, we cannot afford the
longer wait that automation brings.
Both Able and Air have 600,000 units in their first shift capacity, and the company will buy
capacity next year due to the growth of the market and our market share. Capacity will also be
determined by keeping overtime rates below 10%. We plan to keep our 2nd shift capacity close
to zero to avoid paying the extra 50% of labor costs.
Andrews plans on keeping over time to a minimum of 10% to help reduce overtime wage fees.
Andrews will invest in quality initiative training. Andrews will not invest in high-caliber workers
because we are only producing 400-650 units for each of our two sensors compared to our lowtech competitors who produce 1000-1300 units for each sensor. The money that isn’t used to
recruit these high caliber workers will be allocated towards training.
Andrews Corporation will take a conservative approach to forecast production. The company
will keep production for each product to be slightly above the sales forecast by approximately
50,000 units to account for any defective sensors.
To finance our growth, operation expenses, and capital improvements, the company will issue
out stock and bonds as well as take on short-term debt. When we need to finance investing in
improvements for our capital, we plan on taking out short-term loans. These loans will not
exceed $3 million in a given year. We want to avoid borrowing too much to finance our capital.
We plan on issuing stock and bonds to finance the costs of sending our two high tech sensors
into research and development every year. Whenever stocks and bonds are issued, the
maximum amount for that year will be issued. There will be a limit as to how many times we
issue stock. Stock will be issued once every three years if need be. Every time we issue stock,
we take on more owners. We want to avoid diluting the existing shares of our shareholders by
not issuing out too much stock. The amount of bonds that are taken out in a year is dependent
on the amount of bonds that were already issued. The company will not issue any bonds if the
total amount of money owed to paying bonds reaches $20 million. We do not want to be in a
position in which we are too highly leveraged so that we can ensure repayment to our lenders.
Additionally, we want to keep the accumulated interest of bonds to a minimum buying not going
past that $20 million limit.
If research & development and capital improvements are financed and we have enough cash on
hand, we will then consider buying back stock and issuing dividends. For the company to have
enough money on hand to buy back stock and issue dividends, our cash reserve must be at
least $15 million. If the amount of cash we have is below $15 million, we will refrain from buying
back stock and paying dividends. We will be conservative with the amount of money we have in
our cash reserve. To account for any financial emergencies such as having to take out an
emergency loan to avoid bankruptcy, we will keep a considerable amount of cash in the reserve.
There will always be at least $7 million in the cash reserve.
Key Financial Measurements
To evaluate the company’s long-term performance, Andrews will focus on three key financial
measurements. Each of these measurements were chosen because they hold interest for both
the company and its creditors and shareholders’. The corporation will ensure that these
measurements are maximized to fulfill our business plan.
Three Key Financial Measurements:
Leverage Ratio- Andrews will measure the amount of debt it uses to fulfill all of its financial
needs. This information will be useful to creditors because it shows how much debt the
company is using to finance its assets. Too high of a leverage ratio can produce a very high risk
for both the company and creditors. The most common way to measure leverage is calculating
the debt-to-asset ratio. This is done by dividing the company’s total liabilities by its total assets.
In the third year of conditions, the leverage ratio for all of the companies operating in the high
tech market were as follows:
Debt-to-Asset Ratio (Year 3)
Andrews – 26.6%
Baldwin – 47.5%
Chester – 52.6%
Digby – 47.6%
Erie – 50.7%
Ferris – 48.7%
Our debt-to-asset ratio in the third year of conditions was a little under 23% lower than our
competitors’ average of 49.4%. This shows that Andrews has nearly twice as less debt that its
competitors. Our corporate strategy includes not taking on too much debt in comparison to
assets. Therefore, we do not want to be as highly leveraged as our competitors are. We want to
provide a consistent return on equity to our owners. By having a highly leveraged company, we
run the risk of having a very low return on equity when sales are weak. To keep our leverage
from being as high as our competitors, the company will take on more equity than accumulating
long and short-term debt.
Return on Equity- We want to measure how much profit the company makes with each dollar of
stockholders’ equity. Being able to see how their money is being used is important to
shareholders. Andrews Corporation aims to maximize the money it receives from these owners.
In order to do so, the company must first see an increase in profit. In the third year of conditions,
Andrews return on equity was 8.2% which ranked second lowest in the high tech market
segment. The company will soon see a rapid increase in return on investment in the upcoming
years due to an increase in sales from the Air sensor. To maximize return on equity, we must
minimize costs, increase sales, and avoid being too highly leveraged. A 25% return on equity is
measured as a success and is a goal we set out to reach.
Cash flows- Andrews Corporation needs to see how cash is used during a period. We must
have enough cash in our reserve to pay our creditors and avoid taking out emergency loans.
We have to carefully observe how much cash is going to each activity in our business. At the
end of the period, we measure the change in cash from the previous year. There are years that
the change in cash can be negative so we have to watch carefully for that. For the third year of
conditions, we added $2,818,000 to the cash reserve. We measure the success of cash flows
by having enough money in our cash reserve to pay our creditors. Our strategy is to have at
least $7 million in the cash reserve to further avoid having to take out emergency loans.
(Units in Thousands)
Projected Profit and Loss
Total Period Costs
Total Period Costs
To best satisfy our customers and keep up with market trends, Andrews Corporation finds it
crucial to follow our competitors movements and stay informed about how our competition is
doing in our industry. We sell two high tech sensors, Able and Air, which compete with
companies Baldwin, Digby, and Ferris who all have high tech sensors as well.
Currently our sensors have 20% of the market share in the high tech sector with Able carrying
15% of the market share and Air holding 6% of the share, which is lower than it normally would
be because it just recently came out of Research & Development. While also carrying a large
market share, our sensors are projected to be among the highest rated in customer survey
score, with Able currently second overall with a score of 32 and Air with a score of 28, the
lowest in the high tech sector being 26. This is going to increase in the coming years because
Air currently has an abnormally low customer awareness of 53% because of its new release.
53% is also competitive with our competition’s customer awareness scores at the moment so
once we start funding promotion on Air more and with time the awareness will pass competitors,
especially considering that Air has the best performance and size rating in the entire high tech
Our competitors for the most part are focusing on keeping a low perceived age for their sensors,
with the sector ranging from an age of 0.61 to 1.56. We plan to stay ahead of them because
after three years we are going to continuously send our sensors through R&D so that our age
never rises above an age of 2. The Mean Time Before Failure (MTBF) for the sector is
consistent for the most part, all of the sensors being around 22,000. Air and Able also are the
most expensive in the sector, both being $45, however, our high rating in size and performance
should drive our customers to buy our product since they tend to be less price sensitive with
high tech products, and we can use these extra funds for additional promotion and sales.
Our company is not worried about closet competitors due to the fact that their products so
closely align with the market demands of the low tech industry, that it would take years for them
to start moving their products over into our sector’s market. When this happens, we will be able
to address the problem long before it becomes relevant to our situation in the high tech market.
Our company is not worried about closet competitors because companies with products in the
low tech sector have so closely aligned their products with market demands that it would take a
couple years of work in order to make the transition from the low tech sector to the high tech
sector. Companies with sensors in the low tech sector have too big of size and too low of
performance, too low of prices, and too high perceived age to make an easy transition into the
high tech sector, and if they do we will be able to notice long before it will have an impact on our
In conclusion, we plan on keeping our products Able and Air, and any products that may be
released in the future, by primarily keeping the perceived age of our products as low as
possible. This is costly, however, in this market there is a high demand for the newest and most
innovative product, so this is what we are going to market to. We will adjust for this high cost in
R&D by selling our products for top price, which we find necessary if we are going to be selling
top quality products. We also plan on keeping our products at the leading edge by keeping the
size as low as possible and the performance the best it can be.