The SLP requirements are in the attached document along with the background materials. Also, I have included the module 3 SLP as the CVP recommendations should be used for this.Module 4 – SLP
STRATEGY IMPLEMENTATION AND STRATEGIC
CONTROLS
Simulation
In Module 4, you will continue with the CVP analysis you
completed in the Module 3 SLP.
Scenario Continuation:
It is still January 2, 2013. You have just completed your
revised SLP3 strategy using CVP analysis, and you are
eager to implement your decisions for 2013 through 2016.
Using the CVP analysis from SLP3, run the simulation for a
final time. Again, be sure to take notes about your analysis
and document the reasoning behind your decisions.
Finalize your report showing the strategy you have used.
Assignment Overview
Using the strategy that you developed in SLP3, run
the simulation. Document your results as you did previously.
Review and analyze these results, and develop a final
strategy.
Please turn in a 6- to 8-page paper, not including cover and
reference pages.
Keys to the Assignment
The key aspects of this assignment that should be covered
and taken into account in preparing your paper include:






The revised strategy consists of the Prices, R&D Allocation %,
and any product discontinuations for the W1, W2, and W3
tablets for each of the four years: 2013, 2014, 2015, and 2016.
You must present a rational justification for this strategy. In
other words, you must provide support for your proposed
strategy using financial analysis and relevant theories.
Use the CVP Calculator and review the PowerPoint that
explains CVP and provides some examples.
You will need to crunch some numbers (CVP Analysis) to help
you determine your prices and R&D allocations.
Make sure your proposed changes in strategy are firmly based
in this analysis of financial and market data and sound
business principles. Your goal is to practice using CVP and get
better at it.
Present your analysis professionally, making strategic use of
tables, charts, and graphs.
Time Line Summary:
SLP1


2016: Hired on December 31, 2016.
Turned in first report to CEO Smothers.
SLP2



You are returned – via Time Warp – to January 1, 2013.
You make decisions for 2013 – 2016.
December 31, 2016 – You have revised all four years, and you
write up your summary report.
SLP3


Apparently, your SLP2 decisions were not “good enough,” as
you have again been returned to January 1, 2013.
It is once again January 1, 2013: You decide to use CVP
analysis to develop a revised four-year plan for your strategy.
You analyze the results of your first decisions from SLP2,
taking notes, and documenting your decision-making process.
You use the CVP Calculator to help you develop your strategy.
Your notes explaining the logic behind your decisions.
SLP4



It is still January 1, 2013. Using your CVP analysis from SLP3,
you run the simulation, implementing your revised four-year
plan. You keep track of your financial and marketing results
year over year.
You submit your final 6- to 8-page report, which includes your
Final Total Score.
You compare – and report – your results with previous results.
SLP Assignment Expectations
Your paper will be evaluated using the grading rubric.
Tips and Suggestions
Note the following tips and suggestions:
You might find these downloads useful:
Decision Matrix Table – Download this Word doc with a blank
table you can use to show your proposed strategy decisions.
PowerPoint discussing CVP – Provides a good overview of Cost
Volume Profit analysis, the various equations that you can
use, and how to use it. Some examples are provided
showing how to use the CVP Calculator.
CVP Calculator – This an Excel-based calculator that you can
use to determine prices, volumes, and profits. Keep in mind
that it will tell you what need, but the market determines
what you actually get.




Include a cover page and a reference page, in addition to the
6-8 pages of analysis described above.
Include appropriate section headings.
Use charts and graphics strategically, but do not use these as
“space fillers.” Include lengthy tables, etc., in an Appendix
instead.
Cite and reference all sources that you use in your work,
including those that you paraphrase. This means include
citations and quotation marks for direct quotes, and citations
for that information which you have “borrowed” or paraphrased
from other sources.
Module 4 – Background
STRATEGY IMPLEMENTATION AND STRATEGIC
CONTROLS
Strategy is implemented using organizational design
(structure), people, culture, and control systems. Strategy
must successfully work through these elements in order to
produce performance. No matter how well a strategy is
conceived, if an organization’s people cannot implement it, if
the culture cannot support it, if the structure cannot
coordinate it, and if the systems cannot measure and control
it—the strategy will fail.
We will start by considering how of each of these
components individually link to strategy. By way of the Case
analysis, we will examine the integration or “fit” between the
various components and strategy.
Structure
Organizational structure refers to the manner in which the
lines of communication of authority are established, the
manner in which work is divided up among organizational
members, and the way that communication and work are
coordinated. Different types of structures support different
types of strategies. The key elements of structure that have
the greatest effect on the success or failure of strategy
implementation are centralization, boundaries, networks,
and virtual organization.
Centralization

Centralization refers to the level of concentration of decision
making. In a highly centralized organization, decisions are

made by a relatively small number of people, usually
concentrated at the highest levels of the organization.
Standardization is common in centralized organizations, thus
favoring economies of scale and efficient value chains.
Decentralized organizations are characterized by flexible and
autonomous decision-making groups at operational levels in
the organization. Such groups have the ability to rapidly adjust
to changes in the marketplace and are well-suited to strategies
that require innovation. However, because of duplication,
economies of scale are difficult to achieve.
Emerging Structures



Borderless Organizations: Taking cross-functional teams to a
new level, the borderless organization does not just assemble
teams with members from different organizational levels and
functions. Instead, the borderless organization removes
barriers both vertically (between levels) and horizontally
(between functions or departments). The implications for
strategy implementation include increased information,
transparency, and flexibility.
Alliance Networks: These are collections of suppliers,
distributors, customers, and even competitors who have the
ability to bring needed assets to bear on an urgent problem
where there is insufficient time to develop the needed
resources and capacities in-house. Organized and coordinated
online, these networks can be mobilized and put to work
instantaneously.
Virtual Corporations: An extension of Alliance Networks, the
virtual corporation is an extra-organizational coalition of people
and organizations brought together expressly to work on a
specific problem or project. They can be assembled rapidly
and dispersed as soon as the project is over, representing the
ultimate in flexibility and speed in strategy implementation.
The following reading is an exposition on how various types
of teams can be useful in strategy implementation:
Pryor, M.G., Singleton, L.P., Taneja, S., and Toobs, L.A.
(2009). Teaming as a strategic and tactical tool: An analysis
with recommendations. International Journal of
Management, 26 (2), 320-334. Retrieved on November 6,
2012, from ProQuest.
Review this presentation on Organizational Design by
Professor Anastasia M. Luca, Ph.D. MBA.
Strategic Controls (Systems)
Three organizational systems are essential to controlling
strategy implementation:
Accounting and budgeting systems: These systems can
be complex and not easily adapted. If a new strategy
requires data that is not easily accessible through existing
accounting systems, implementation can be slowed, and a
potentially successful implementation can be jeopardized. If
a new proposed strategy does not fit a familiar pattern,
decision making can be become risky and unpredictable.
Information Systems: Information technology is playing an
ever greater role in strategy implementation. IT provides
point-of-sale information between retailers and
manufacturers, streamlines logistics and distribution, and
controls inventories. IT systems must be capable of
providing the right information in the right format to the right
people at the right time.
Measurement and Reward Systems: Rewards can be
used to shape behavior in the direction of meeting strategic
objectives. Rewards must be connected to measures of goal
attainment (e.g., specific increases in market share), and
proper time horizons (future rewards for future goals).
Review this presentation on Strategic Controls by Professor
Anastasia M. Luca, PhD MBA.
People
Strategies that are based on distinctive competencies or
unique capabilities are often dependent on people and their
skills to carry them out. Thus, for successful implementation,
sufficient numbers of people with the right skill sets are
essential.
In-house or Import? Hiring raw talent and growing
employees with the needed qualifications maximizes fit, but
it can take years. Retraining existing workers with new skills
can be problematic when old employees resist “learning new
tricks.” Hiring employees with needed skills external to the
organization is faster, but there is no guarantee that even
they will fit well within the organization’s culture.
Motivation: It is not enough to have the right number of
people with the right skills; people must also be motivated to
work toward successful strategy implementation. Much is
known about motivation, and many tools are available; these
include tangible rewards (e.g., bonuses) and intangible
rewards such as self-fulfillment. Perhaps the motivator with
the most potential for eliciting long-term commitment to
fulfilling the firm’s strategic goals is that
of empowerment, which gives employees the discretion and
autonomy to use their initiative.
The following article highlights the importance of having the
right people in place to achieve strategic goals:
Garrow, V. and Hirsh, W. (2008). Talent management:
Issues of focus and fit. Public Personnel Management,
37(4), 389-403. Retrieved on August 29, 2014 from
ProQuest.
Culture
The fit between an organization’s culture and its strategy
is critical. If a firm is depending on innovation to achieve
differentiation, but the culture is risk averse or has a
tendency to punish mistakes, the strategy will in all likelihood
fail. Culture can support the strategy when three elements
are in alignment:


Shared values that are aligned with the corporate vision and
strategic focus along with a management style that fosters
behavior that will support the competencies that confer
competitive advantage.
Norms can act as strong controls for strategic implementation.
They encourage behavior that is in alignment with shared

values. People can circumvent rules, and they cannot be
watched all of the time, but norms can promote the desired
behavior even when nobody is watching.
Symbols model for employees what values and norms are
important. Some important symbols include the vision and style
of the founder of the company and folklore or stories that
embody company values, rituals, and routines, and which
reinforce the types of events and behaviors that are most
desired and celebrated.
The following reading ties together the importance of
systems, strategy, structure, and culture. It is highly
readable and will help you see how all of these elements are
interdependent and must align to achieve successful
implementation:
Heneman, R. L., Fisher, M. M., and Dixon, K. E. (2001).
Reward and organizational systems alignment: An expert
system. Compensation & Benefits Review, 33(6), 18-29.
Retrieved on November 6, 2012, from ProQuest.
Optional Reading
Aligning organizational culture with business strategy. (2013,
November). Towers Watson. Retrieved on August 29, 2014
from http://www.towerswatson.com/enUS/Insights/Newsletters/Global/strategy-at-work/2013/viewpointsqa-aligning-organizational-culture-with-business-strategy
Durden, C. (2012). The linkages between management
control systems and strategy: An organic approach.
Proceedings from The International Conference on
Accounting and Finance. Singapore: Global Science and
Technology Forum. Retrieved on August 29, 2014 from
ProQuest.
Klosowski, S. (2012). The application of organizational
restructuring in enterprise strategic management
process. Management, 16(2), 54-62. Retrieved on August
29, 2014 from ProQuest.
COST VOLUME PROFIT ANALYSIS
1
Trident University International
Name
Wonder Company CVP Analysis
Module 3 SLP
MGT599: Strategic Management
Professor
Date
COST VOLUME PROFIT ANALYSIS
2
Introduction
For effective pricing and strategic decision making, cost-volume-profit (CVP) is one of
the analyses performed when determining the pricing and volume of products to be sold to
achieve specified profitability. According to Creese (2017), the cost-volume-profit (CVP)
analysis is an accounting method of cost accounting that seeks to determine the effect of varying
levels of costs and volume on a given product’s overall profit. In accounting, the cost-volumeprofit analysis is performed to understand the relationship between costs, prices, and sales
volume on profit. The CVP is also known as the break-even analysis and shows the sales volume
that a business needs to make to ensure that they do not make a loss while not making any
profits. At the break-even point, total cost and total revenue are equal. From the simulation
provided, the Wonder Company’s marketing VP is charged with the responsibility of making
strategic business decisions on the sales that the business makes.
The current case entails marketing initiatives and Wonder Company’s strategic decisions
to maximize profitability. Break-even analysis seeks to determine the volume and price that a
product should be sold to make, not profit nor loss. This means that the revenue generated by the
business should be able to cater for all costs. According to Creese (2017), the break-even
analysis is important as it helps a business to come up with its organizational cost structure and
determine the volumes and pricing of products that need to be sold for the business to meet its
operational costs. Akan, Allen, Helms, & Spralls (2006) note that calculating the break-even
point of a business is an essential step in pricing, promotion, and cost control. By knowing what
a business needs to sell and the price at which it should sell, key business decisions can
positively transform business profitability. In the Wonder Company case, three products are
compared over a period of four years.
COST VOLUME PROFIT ANALYSIS

3
2012
In 2012, the pricing for W1 was adjusted to $250 from $285, while the R&D allocation
was maintained at 30%. This was made following the recommendation that W1 was priced
higher than other competing products in the market. This adjustment resulted in an increase in
sales for W1 to 2,389,877 up from 968,979. At the same time, variable cost increased from
$145,345,882 to $418,418,502. In the same year, the price and R&D allocation for W2 was
maintained at $439 and 42%, respectively. Despite this, sales recorded in 2013 shows a
significant increase. Based on sales recorded in 2012, there is a need to change the R&D and the
pricing for W3 going into 2013. From the previous analysis, the price for W3 was reduced from
$185 to $150, while the R&D allocation was increased from 28% to 30%.

2013
The lowering of the price of W1 from $285 to $250 led to a significant increase in
demand and the variable cost incurred from the analysis. However, an analysis of the variable
cost per product shows that the allocation per product remains the same at $150 per product.
Based on these decisions made for the year 2013, the R&D cost for 2013 was $75,000,000.
Based on the units sold, the variable cost for each W1 product is $150. At this selling price and a
variable cost of $150, the Wonder Company would need to sell 822,000 pieces of W1 to breakeven. Alternatively, the business can reduce the price of its products to $176.46 while
maintaining the sales volume at 2,789,877 to break-even. With the current analysis’s intention to
identify the break-even point, the company would need to make fewer sales or reduce product
pricing to achieve this.
COST VOLUME PROFIT ANALYSIS
4
Despite the price for W2 and R&D allocation remaining unchanged, the product
witnessed increased demand in the market. Despite maintaining the price and R&D allocation
similar to 2012, W2 recorded a significant sales increase in 2013. In the year, volume in sales
rose to 1,431,588 up from 562,961. To break-even, while maintaining the current R&D
allocation and pricing, the Wonder Company would need to record 290,122 sales. However, at
the current sales volume, the Wonder Company would need to reduce the price of W2 to
$308.24. This would translate into sales revenue of $441,266,700, which covers all related costs
and R&D without making any profit.
The adjustment in R&D allocation and pricing for W3 going into 2013 significantly
impacted the sales recorded. While the product had recorded 0 sales in 2012, the changes
resulted in 265,545. From the analysis of the variable cost recorded on the product, variable cost
stands at $55 per product selling at $150. While the product had not recorded any fixed and
variable income in 2012, this also increased significantly in 2013. Despite the increase in sales,
W3 is the only product that didn’t break-even in the year 2013. Based on the CVP analysis, W3
would have to record sales of 447,526 to break-even. Alternatively, the Wonder Company would
need to raise the price of W3 to $223.33 while maintaining sales volume at 265,545. As the new
VP of Marketing, there is a need to determine which action to take to ensure W3 break-even.
Going into 2014, there is a need to review each product’s performance and the
recommendation given the market situation and adjust accordingly to enhance sales and prolong
the product lifecycle. Rothmeier (2019) notes that the lack of innovativeness on product
marketing can reduce the life cycle, which negatively impacts profitability. Going into 2014, the
R&D allocation set in 2013 will remain for product W1. However, it was noted by the marketing
advisor that customers are paying a higher price for W2 compared to similar products in the
COST VOLUME PROFIT ANALYSIS
5
market. To address this, the price of the W2 was reduced from $439 in 2013 to $400 in 2014.
This will happen while maintaining R&D allocation at 42%. While notable improvements were
made with W3, there is also a need to revise the product price going into 2014 to trigger
increased sales. As such, the new VP will maintain the price for W3 at $150 while maintaining
R&D allocation at 40%.

2014
The decision made in 2014 had a significant change in how the business performed and
affected its ability to break-even. Following the change above being implemented, W1 recorded
2,876,333 in sales at a variable cost of $431,449,931. This translates to a variable cost of $150.
At a fixed cost of $75,000,000, the Wonder Company would need to make a sales volume of
822,000 for $250 to break-even. Alternatively, the company would still achieve this by
maintaining the recorded sales volume at 2,876,333 while reducing the price to $178.58. The
changes made to W2 also led to some significant changes in terms of sales volume. The product
recorded a sales volume of 3,501,639 at a variable cost of $275 per product.
To break-even, the Wonder Company would need to sell 380,640 products at the set price
of $400. However, going by the recorded sales volume of 3,501,639, the business would reduce
its price to $288.59 per product. This shows that the product is highly profitable even after taking
into account its variable cost. Going into 2014, the changes adopted for W3 resulted in a
significant increase in sales from 265,545 in 2013 to 453,346. Going by the variable cost
recorded in the year translates to $55 per product. Despite the changes, W3 didn’t break-even in
2014 as a result of low volumes and pricing. At the current price, the Wonder Company would
need to make 495,789 sales volume to break-even, against the current 453,346. Alternatively, the
COST VOLUME PROFIT ANALYSIS
6
company would have to increase the price of W3 to $158.89 while maintaining the current
pricing.

2015
The decisions made in 2014 would be reviewed at the beginning of 2015 so as to
determine the marketing approach of the products going forward. Following the implementation
of the decisions made for 2015, W1 recorded a significant reduction in revenues generated. To
break-even, the Wonder Company would have to make 1,174,286 products for W1 or adjust the
price to $291.12 without reducing the number of sales recorded in the year. The product W1
should be terminated at the end of 2014. Rothmeier (2019) notes that products that cannot breakeven into the business’s profitability result in reduced income. To address this, W1 should be
terminated going into the year 2015, leading to a significant reduction of revenue despite reduced
pricing. Apart from W1, W3 also recorded a significant reduction in sales recorded. At a variable
cost of $275 per product and a fixed cost of $37,500,000, W2 barely made a profit for this year
compared to previous years. Despite this, there is no need to discontinue the product at this point
as it continues to make profits, unlike W2, which fails to break-even at this point.
To break-even in the year 2015, the Wonder Company would need to make sales of
380,640. Alternatively, the company would need to reduce the price of W2 to $302.96 while
maintaining sales volume at 1,701,855. This way, the product would make 0 profit while the
company would also make no profit. The changes made in 2015 will also lead to increased
profitability for W3. At a variable cost of $55 per product, the Wonder Company would only
need to make 644,000 sales to break-even. Alternatively, the break-even point can be achieved
by reducing the price to $98.39 while maintaining the sales volume recorded in the year. Going
COST VOLUME PROFIT ANALYSIS
7
by this, the business will make a cumulative profit of $1,442,637,763. While W3 had losses and
failed to break-even before 2015, strategic decisions made over the four years lead to product
profitability at this point. This shows that consistently adjusting the pricing and the R & D
allocation to meet customer demand, a business can extend its product life cycle and contribute
to increased profitability (Narasimhan, 2016). The strategic decision made for the three products
has contributed to enhanced profitability in the company’s best interest.
Strategic Decisions
W1
W2
W3
Year by Year Decisions: Pricing & R&D Allocations
2012
2013
2014
Price – $285
Price – $250
Price – $250
R&D % – 30%
R&D % – 30%
R&D % – 30%
Discontinue? No
Discontinue? No
Discontinue? Yes
Price – $439
Price – $439
Price – $400
R&D % – 42%
R&D % – 42%
R&D % – 42%
Discontinue? No
Discontinue? No
Discontinue? No
Price – $185
Price – $150
Price – $150
R&D % – 28%
R&D % – 30%
R&D % – 40%
Discontinue? No
Discontinue? No
Discontinue? No
2015
Price – $220
R&D % – 30%
Discontinue? Yes
Price – $400
R&D % – 42%
Discontinue? – No
Price – $130
R&D % – 45%
Discontinue? No
Conclusion
The break-even analysis is an important concept as it helps identify the number of sales
and the product pricing that a business needs to make to remain in operation. By working out the
break-even analysis, the business can make key decisions relating to overall pricing and volume
that need to be made, influencing promotion efforts. In the Wonder Company’s case, undertaking
a break-even analysis helps to identify the volumes that the organization should achieve to
remain profitable.
COST VOLUME PROFIT ANALYSIS
8
References
Akan, O., Allen, R. S., Helms, M. M., & Spralls, S.A. (2006). Critical tactics for implementing
porter’s generic strategies. The Journal of Business Strategy, 27(1), 43-53. Retrieved from
ProQuest.
Creese, R. (2017). Time based break-even analysis. Annual Conference Proceedings. DOI:
10.18260/1-2—13416. Retrieved from Academic Search Complete (EBSCO).
Narasimhan, C. (2016). Break-even analysis. The Palgrave Encyclopedia of Strategic
Management, 1-3. Retrieved from ResearchGate.
Rothmeier, S. G. (2019). The effect of financial leverage on air carrier earnings: A break-even
analysis: Comment. Financial Management, 9(1), 88. Retrieved from ProQuest.

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