Post on 14-Oct-2014
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2011Mudra Institute of Communications, Ahmedabad
Arnab Mukherjee (2009-09-A) || Charu Chopra (2009-015-A)
CONTENTS
Strategy and Performance Analysis............................................................................................................................4
Quarter 1............................................................................................................................................................................ 4
What we did................................................................................................................................................................. 4
The Results...................................................................................................................................................................4
What we learnt........................................................................................................................................................... 4
Quarter 2............................................................................................................................................................................ 5
What we did................................................................................................................................................................. 5
The Results...................................................................................................................................................................5
What we learnt........................................................................................................................................................... 6
Quarter 3............................................................................................................................................................................ 6
What we did................................................................................................................................................................. 6
The Results...................................................................................................................................................................7
What we learnt........................................................................................................................................................... 7
Quarter 4............................................................................................................................................................................ 7
What we did................................................................................................................................................................. 7
The Results...................................................................................................................................................................8
What we learnt........................................................................................................................................................... 8
Results vs. Objectives........................................................................................................................................................ 9
The final Balanced Score Card..................................................................................................................................9
Vision................................................................................................................................................................................ 10
Mission............................................................................................................................................................................. 10
For customers...........................................................................................................................................................10
For employees..........................................................................................................................................................10
For Shareholders.....................................................................................................................................................11
For bankers............................................................................................................................................................... 11
SWOT Analysis...................................................................................................................................................................12
Learnings.............................................................................................................................................................................. 13
Excel Based Learning.................................................................................................................................................13
As a Business Simulation..........................................................................................................................................13
Theoretically..................................................................................................................................................................13
Team play........................................................................................................................................................................13
Comparison with Markstrat & BOSS..........................................................................................................................14
Based on General Information...............................................................................................................................14
Based on analysis and objectives..........................................................................................................................15
Analysis based on decision specific aspects of Markstrat and ibizsim................................................16
Analysis based on decision specific aspects of Boss....................................................................................17
Modification Suggested in ibizsim...............................................................................................................................18
comments & suggestions on use of Balanced scorecard.................................................................................19
Finance perspective.......................................................................................................................................................19
Customer perspective...................................................................................................................................................19
Internal processes perspective...................................................................................................................................19
Learning and development perspective..................................................................................................................19
STRATEGY AND PERFORMANCE ANALYSIS
In this section, we have given a summary of what strategy we adopted in each quarter, what was it
result and how it helped us alter and modify our decisions for the subsequent round.
QUARTER 1
WHAT WE DID
We started out by increasing dividends to 5%
We increased prices throughout by 2%
We increased investment in product policy for Bordo and Carti
We kept production levels same and didn’t go in for overtime
We spent 40% more on communications, TQM and Production Technology to improve
product quality and demand
No urgent orders were placed
Ordered raw material keeping in mind production for next two periods
No raw material for alesa was ordered, as we had enough in stock for the next 2 periods
Took a long term loan of 16,240,000 euros
THE RESULTS
High level of production of both alesa and bordo happened
The delivery capacity of the sales branch in market 2 and market 3 was less than the total
demand. Because of this you will be able to deliver only 97.71% of the total demand in
market 2 and 91.43% of the total demand in this market 2.
As a result there were unfulfilled orders of Carti in markets 2 and 3.
As planned, we had enough stock left of Alesa and Bordo for the next period
Production time reduced marginally for all 3 products
Rejection rate reduced for Carti
Deliverable part of production remained unchaged
Product Quality improved marginally
Debt/equity ratio increased to 127
Cash in hand rose to 15 million euros
Profit at the end of the period was 1 million euro upwards
WHAT WE LEARNT
We needed to up-haul the sales branches’ capacity
We needed to increase image to increase demand as the competition was playing up on image
Deliverable part of production had to be increased, so was needed for product quality
Both rejection rate and production time had to be reduced further substantially
The above 2 points were necessary to fight it out in the market by flooding the market with
our product after improving our image
QUARTER 2
WHAT WE DID
We invested 10% more on lean management to decrease throughput time
Product Policy investment was increased for Alesa (as we needed only alesa production in the
next period)
For the next period, we kept minimalistic production requirements (as we had to deal with a 4
week holiday period)
We kept the prices same (to avoid image fall due to price increase in subsequent periods)
We still used only single shift for production due to already high level of stocks
Increased the transportable quantity to match demand and to avoid any further unfulfilled
orders
We spent 40% more than the previous period on communications, the training of sales
personals and TQM to improve product quality and demand
Raw material was ordered only for alesa production as we had enough stock of bordo and
carti for period 3
As we had forecasted and planned production for the next 2 periods, we sold off 30 machines
and hired 80 people with the aim of going into double shift in the next period and then
eventually going into single shift again in the last period.
THE RESULTS
High level of production kept stocks at optimum and well in-stock for the next period
Sales figures for Bordo and Carti improved significantly, while sales for Alesa remained
almost constant
All demand was met as a result of better planned sales branches
Quality of products increased further
Turnover of Personnel reduced
Deliverable part of production still remained unchanged
Production time and rejection rate reduced considerably for all 3 products
A loan repayment of 2 million was made, and a fixed deposit of 2 million was made
Despite a cash-in hand of 13 million, a calculated and anticipated loss of 2 million was
incurred due to sale of machinery
Debt/equity ratio was contained at 127
WHAT WE LEARNT
There was a need to grab market share in case of Alesa, as the market was declining and new
customers could only be taken away from competition
Image (lost due to unfulfilled orders in period 1) had to be improved in USA and China for
better demand
We needed to reduce unused cash in hand (for better technology, personnel training, sales and
communication)
Despite the surplus cash-in hand, no more loan could be paid back to avoid making the
debt/equity ratio fall further
Profit had to be substantially higher in the next period to over-come the loss that we had
incurred in this period
QUARTER 3
WHAT WE DID
Investment in lean management was increased by 20%
We increased prices throughout by 40% to en-cash on the good image
Production levels were kept good despite the vacation period by going in for double- shift on
130 machines
We increased number of stores in all markets by investing 40% more in sales policy
We again spent 40% more than the previous period on communications and TQM to improve
product quality and demand, and to mitigate the negative effect of price hike on image and
demand
Investment on product policy again went up by 40%
As the price of bought-in goods fell below the cost price of alesa, for the last period,
production was limited to single shift and bought-in alesa was ordered
Raw material wasn’t ordered for alesa
Took a long term loan of 1 million euros
THE RESULTS
Throughput time decreased by 2 days for both single and double shift
High level of production of both alesa and bordo happened
Image went up in 3 markets (except in Germany) despite the price hike
The sales figures went up and profits increased substantially (3 million), mitigating and
nullifying the loss from the previous period
Quality of products increased
Production time reduced for all 3 products by almost 1 minute
Deliverable part of production became 47%
Debt/equity ratio decreased to 125
Cash in hand at the end of the period was 14 million euros (was considerably higher because
less raw material and more of bought-in goods were ordered)
WHAT WE LEARNT
Market share could have fallen when we increased prices but the balance could be maintained
with betterment of image
Flooding the market helps and increases sales if competitors fail to meet demand
Brought-in goods were a good option, when the discounts were being offered
We could afford loss in one period, if it helped in the long-term strategy
QUARTER 4
WHAT WE DID
We increased the investment in lean management by 0.1 million
Increased the dividend payout to 6%
We kept the prices same
We went back to single shift as we needed production of only 2 products of which Carti
already had substantial stocks
Increased the investment in sales branches, communication policy and training of personnel
by 45%
We increased expenditure on product policy and TQM again by 40%
We could have sold more machines and gone into overtime but we didn’t want to carryover a
negative profit figure from the last period
Invested 40% more on production technology
Redeemed long term loans worth 6 million to reduce debt/equity ratio to 125.8
THE RESULTS
The sales figures went up and profits increased significantly
Throughput time decreased further by a day each for single and double shift
Demand for Carti could not be met completely. We met our estimated demand, but additional
demand due to 0 sales from another company, weren’t factored in.
Both store and branch inventories were reduced to bare minimum
Quality of products increased to 102.15
Deliverable part of production increased to 40%
Production time reduced further
Debt/equity ratio reduced to 125
Cash in-hand increased to 14 million euro despite the loan pay-back
WHAT WE LEARNT
We improved market image significantly
We improved on the deliverable part of production by investing in production technology
We performed consistently on all parameters
We learnt that a healthy mix of bought-in goods and production could help a long way in
optimally utilizing resources and capacity
RESULTS VS. OBJECTIVES
THE FINAL BALANCED SCORE CARD
Weight Company value
Base value
Score
Finance perspective
Profit before tax 10 7,61,131 15,52,691 3 Debt-equity ratio 10 126 100 10 Dividend 5 6 2 10
Customer perspective
Market share (sales) 10 17.34 16.67 8 Image 8 114 100 10 Adherence to delivery dates 7 99 100 9
Internal processes perspective
Deliverable part of production 10 40.00 33.33 8 Rejection rate 10 7.20 7.33 7 Product quality 10 102.15 100.00 7 Production time 5 28.45 31.33 8
Learning and development perspective
Turnover of personnel 10 2.00 2.00 6 Training of personnel 5 7,18,141 7,17,176 4
Weighted average score 7.43
Period Score 1 6 2 6 3 7 4 7
Average score over all periods 6.7150
VISION
The vision was to improve the market position of the company while achieving a satisfactory level of
profitability and ensuring the long-term viability of the company
Result:
Initial market share was 16.67% which converted to 17.34% at the end of quarter 4
A high level of Profitability was maintained throughout,
o with adequate cash-in hand at all times
o no short-term loans taken/ no over-drafts
o partial re-payment of long-term loan
o investment in terms of fixed deposit
o a consistent debt-equity ratio of 125 to 127
Long term viability was insured by
o Building a good image
o Maintaining high levels of profitability
o Increasing market share
o Keeping all stake-holders pleased
MISSION
FOR CUSTOMERS
1.1. To improve the Image of the company to have a better perception among customers
Result: the image was up-hauled from 100 in period 0 to 114 at the end of period 4
1.2. Product quality improvement for image enhancement
Result: product quality at the end of four quarters was 102.15 as against 100 in period 0
FOR EMPLOYEES
1.3. Better Image of the company to reduce personnel turnover rate
Result: the image was up-hauled from 100 in period 0 to 114 at the end of period 4;
personnel turnover rate never went over the base value of 2
1.4. Profit maximization so as to be in position to give better dividends and be able to provide
consistent training to employees
Results: the end profit was 0.7 million and the percentage of dividend paid out was a
whopping 6%
1.5. Consistency of cash-in-hand so as to avoid workforce downsizing based on sales in a
particular period
Results: The cash-in hand at all times was enough to keep the plant running and to give-out
salary to all employees. Work-force was increased to meet high levels of required production
in tune with demand but a down-sizing never happened
FOR SHAREHOLDERS
1.6. Consistent increase in Market share
Results: Initial market share was 16.67% which converted to 17.34% at the end of quarter 4
1.7. Better company Image
Result: the image was up-hauled from 100 in period 0 to 114 at the end of period 4
1.8. Lowest possible Debt/equity ratio
Results: Long-term loan repayment wherever possible, to decrease the debt/equity ratio and
keep it constant around 125
FOR BANKERS
1.9. High Profitability
Results: A high level of Profitability was maintained throughout,
with adequate cash-in hand at all times
no short-term loans taken/ no over-drafts
partial re-payment of long-term loan
investment in terms of fixed deposit
a consistent debt-equity ratio of 125 to 127
SWOT ANALYSIS
StrengthsAgile thinking using spiral modelLong-term focus instead of short-term planningBalanced approach to capactity utilization and purchasingFuture planning accuracy in terms of financesNo downsizing of employees based on salesOptimum utilization of capacityConsistency of image
WeaknessesCouldn't meet demand left by competitiors on 2 occassionsSurplus cash-in hand Need to maintain profitability as a goal, hence further sale of machines not viable in period 4
OpportunitiesIncreased deliverable part of productionIncreased quality of productReduced rejection rate and time taken to produce goodsMarket share could have been increased with the help of all the above
ThreatsBetter pricing strategy by competitorsLow image as compared to competitors in USA marketIncreased investment in production technology, TQM and communications didnt always bring immediate or linear benefits
LEARNINGS
EXCEL BASED LEARNING
The simulation was most effective in terms of acclimatization with excel and in making
templates for business decision purposes.
Secondly, it also gave an insight into when to rely on templates and when to use your own
judgments (in the scenario of having external variables)
AS A BUSINESS SIMULATION
Helped have a deep-dive into strategic planning and controlling of resources, which wasn’t
possible otherwise in real life
Practice of application of general business principles
First experience with analysis of reports to ascertain the interrelationships, as well as the
factors involved, in order to establish a rational basis for subsequent optimal decisions
Real time planning and changing of decisions based on long term objectives
effective decision-making in the given time per period
THEORETICALLY
Made concepts of financial planning more sound by practical application and training
Gave a head start into the structuring of the production plant, sales and turnover in markets,
managing stocks of goods and handling of cash, outgoing and incoming payments
To be able to act wisely in case of deviations from the planned or expected course of events
based on long term strategy
TEAM PLAY
How to learn from other’s mistakes
How to corroborate and come up with a mutually agreed upon decision
Allocation of specific functions (for example in sales, finances, production) to individual
team members based on strengths of each member.
COMPARISON WITH MARKSTRAT & BOSS
Markstrat and BOSS are both StratX simulations while iBiz Sim has been developed by professor
Ullal in Germany. Thus the interfaces are completely different, we will now look at some of the major
differences in a tabular form given below: -
BASED ON GENERAL INFORMATION
General
Information
Markstrat BOSS iBizSim
Developed By StratX StratX Prof. Ullal
Focus STRATEGIC
MARKETING
STRATEGY AND
INNOVATION
OPERATIONS &
MARKETING
Audience Experienced Marketers
& MBA
Masters & MBA an
experienced Marketers
Experienced Marketers
and operation specialists,
MBA students
Simulated
Timeframe
Extended duration, 6 to
12 years. Up to 12 one-
year decision period
Short duration, 9 simulated
years split into four rounds
of decisions
Short Duration with 4
decision periods
representing 4 quarters of
a year
Number of
Participants
and
Competition
Type
Industries of 4 to 6
teams (4 to 6
participants each) in
direct competition with
each other.
Unlimited number of teams
(3 to 5) participants each)
in indirect competition.
Each team competes
against 3 computer
controlled companies
6 teams play in each
industry in direct
competition with each
other. There can be up to 6
players in a team
Market
Characteristi
cs
Durable consumer
goods One established
market and possibility to
add an emerging
Video game console 3 types of consumer
durables. One
degenerating, One market
leader and one upcoming
product
BASED ON ANALYSIS AND OBJECTIVES
Analysis And
Objectives
Markstrat BOSS iBizSim
Data Provided
for analysis
Consumer panel
Consumer survey
Distribution panel
Semantic scales
Multidimensional
scaling
Competitive
intelligence
Advertising
experiment
Sales force
experiment
Competitive
benchmarking
Market forecast
Conjoint analysis
Market research studies
For Red round:
Company KPI
Offering characteristics
Benchmarking study
Customer preferences
Sales & Market Shares
Market forecast
For Blue Rounds:
Visual exploration
Management Report
Market Research report
on :-
Pricing
Sales
Quality
Productions
Decisions
Economic Report
Purchasing reports
Summary reports
Decision Reports
Consumer
Segments
Established
Market
5 market segments
based on product
features and price
3 Segments based on product
features and price
No segments but customers
buy based on price, quality,
image and product
availability
Consumer
segments in
New market
3 market segments
based on innovation
adoption curve
Blue ocean market of
noncustomers based on teams’
strategy
N/A (no new market)
Performance
Metrics
Market and segment
shares
Revenues, product
contribution
Net contribution
Return on marketing
expenditures
Stock price index
Market Shares
Revenues
EBIT
Share Price Index
Team decides the needed
performance metrics like: -
Liability Equity Ratio
Market Image
Market Share
Profits
Production and Delivery
Time
Product Quality
Turnover of personnel
ANALYSIS BASED ON DECISION SPECIFIC ASPECTS OF MARKSTRAT AND IBIZSIM
Decision specific Markstrat iBizSim
Product Portfolio Teams may withdraw or launch as
many products as they wish in each
decision period
There are 3 fixed products though a
team may choose not to produce 1 or
more types of products
R&D Teams design, request and
fund their own R&D
projects
No new R&D or products can be
commissioned
Distribution/
Transportation
3 channels (direct, general and
specialized)
Total amount for each product to be
transported to each of the markets
must be specified
Manufacturing Capacity is flexible, but teams must
forecast production target
Manufacturing must be calculated on a
template based on production time of
individual product. Also raw materials
must be ordered in advance along with
machine and personnel decisions
Sales force Teams select the number of sales
people devoted to each product
Teams decide expenditure on sales
branches and sales force both.
Finance/Currency All decisions are taken in K$ and is
the only currency used. Also loan
giving decision is upto the game
coordinator/ Teacher
All decisions are taken w.r.t. the
countries and their currency units. The
maximum loan that can be taken
depends on your equity and current
liability. Also exchange rate fixing and
factoring are essential financial
instruments used
Communications Teams set media and advertising
creation budgets for each product
Teams set media and advertising
creation budgets for each product in
each market
Pricing Team sets the retail price of each
product
Teams set the retail price of each
product in different markets in specific
currency units
ANALYSIS BASED ON DECISION SPECIFIC ASPECTS OF BOSS
Decision
specific BOSS
Blue Ocean Strategy Simulation
RED ROUND BLUE ROUND
‘AS-Is’
Strategy
Canvas
N/A Drawing the current indusry value curve
‘To-Be’
Strategy
Canvas
N/A Using the ERRC (Eliminate, Raise,
Reduce, Create) tools to draw Strategy
Canvas for Blue Ocean Offering based on
analysis of Visual Exploration
Marketing
Budget
N/A Teams set Marketing Communications
Budget
Product
Upgrade
Teams are allowed to
modify the physical
characteristics of their
offering
N/A
Production
plan & Price
Teams set the number of units to produce for the upcoming period, as
well as a recommended retail price to distributors
Segmentation
Strategy
Teams allocate efforts
between the 3 target
segments
N/A
Geographical
Expansion
Decide on coverage rate on the 2 markets, Roundland (main or local
market), and Starland (new or international market)
Distribution
Coverage
Teams allocate coverage
between 3 channels &
quantity and quality of
shelf space
N/A
Corporate
Projects
Teams decide on investments in projects aimed at increasing
productivity, reducing costs and/or improving organization capabilities
MODIFICATION SUGGESTED IN IBIZSIM
1. An important and a required modification in iBizSim would be to redo the coding of the
software as the software makes a lot of errors in calculating the final results. E.g. Increase in
spending on production technology and lean management should reduce throughput time and
in turn increase the deliverable part but the same does not happen even after huge investments
2. The pricing does not have a significant impact on demand. Since all companies produce
similar products the market can be said to be commoditized but steep hike in prices by one
team does not reduce its demand by a significant proportion. In such a case the increase in
price beyond 10% should lead to demand reduction by almost double the price increase
percentage as rational customer’s shift (There is no customer segmentation and loyalists).
3. Also longer duration of at least 12 quarters should be allowed for proper effect of decisions
on the company and to make the game more strategic than its present form where tactics take
precedence over long term strategy.
4. Another important modification would be on the interface as the interface is very rudimentary
and makes many participants lose interest when compared to StratX simulation. Outsourcing
the code might be the answer
COMMENTS & SUGGESTIONS ON USE OF BALANCED SCORECARD
The balanced Scorecard is a new addition to the iBizSim game simulation and it gives a complete
picture on the company performance and does an all round performance review. It reviews the
company on the following key parameters:-
FINANCE PERSPECTIVE
Profit before tax
Debt-equity ratio
Dividend
CUSTOMER PERSPECTIVE
Market share (sales)
Image
Adherence to delivery dates
INTERNAL PROCESSES PERSPECTIVE
Deliverable part of production
Rejection rate
Product quality
Production time
LEARNING AND DEVELOPMENT PERSPECTIVE
Turnover of personnel
Training of personnel
The current iBizsim performance is based on a company not reaching 160 for the liability to equity
ratio which is very rudimentary and easy to achieve. This component of evaluation can be better
done with the help of the weighted average score of the balanced scorecard instead.