business simulation final

1 Team 4

Business Report-Alexander Islands-

Dec. 1, 2012 General Shareholders Meeting

2 Team 4

Objective: To maximize the surplus“Maximize the cash-in and Minimize the cash-out”

Objective

• Cash-in• Cash revenue (60% of

revenue)• Account receivable (40%

of last revenue)• Loan

• Cash-out• Cost of merchandise (70%

of total cost)• Account payable (30% of

last cost of merchandise)• Advertise expenses• Wages• Freight cost• Office rent• Warehouse• Interest• Repay

3 Team 4

To maximize the cash-in…

Objective

Revenue

Price Quantity

The best way is to keep the demand without reducing the price and the lack of inventories

Price sensitivity to quantity…? Optimal Inventory control…?

4 Team 4

To minimize the cash-out…

Objective

Advertisement

Wasteful spending

The best way is to control the advertisement and the procurement while getting the optimal discount

Advertisement sensitivity to quantity…? Optimal Inventory control…?Optimal procurement…?

Cost

5 Team 4

A) Enforcement of policy

Procurement strategyNever lose the opportunity for selling

Important tips are...

1) Predict the demand

2) Inventory control (watch the inventory and the demand for two months ahead)

Minimize warehouse cost and purchase priceImportant tips are...

1) Never keep too much inventory

2) Keep the procurement over 1,200 units as much as possible

6 Team 4

A) Enforcement of policy

Sales strategyAim to sell 10% above the averageKeep the price expensive (but a bit cheaper than

competitors)

1) Price is not sensitive to the demand

2) But we expected the accumulating effectChange the advertisement sensitively

1) The advertisement is sensitive to the demand more than last session

2) Demand control will be easily done by changing the advertisement

7 Team 4

B) Market status

Demand transitionDemand condition was drastically changed after round 5Demand of Simon was higher than Herbert after round 7Finally, demand was stable on final round

1 2 3 4 5 6 7 8 9 10 110

1,000

2,000

3,000

4,000

5,000

6,000

7,000

248 400690 900

1,820

2,556

3,678

4,600

5,6026,013 6,100

6,090 6,001 5,900 5,7405,340

4,780

3,400

2,330

1,6301,201 1,104

Simon Herbert

Num

ber o

f dem

and

8 Team 4

C) B/S and P/L through the rounds

B/S

CashOnHandAndDeposit

33,446

Round 1

AccountReceivableTrade

58,812

AccountPayableTrade24,60

0

InventriesInSimon 2,791 Borrowings11,00

0

InventriesInHervert26,34

2ShareCapital

700,000

Land650,0

00CapitalSurplus

35,792

TotalAssets771,3

92LiabilitiesAndStockholders

Equity771,3

92


20,659

Round 2


53,626


0

InventriesInSimon 0 Borrowings11,00

0


5ShareCapital

700,000

Land650,0

00CapitalSurplus

48,700

TotalAssets794,8


Equity794,8

30


8,513 Round 3


63,786


5

InventriesInSimon 4,210 Borrowings11,00

0


0ShareCapital

700,000

Land650,0

00CapitalSurplus

68,193

TotalAssets812,0


Equity812,0

28

CashOnHandAndDeposit 16,878 Round 4

AccountReceivableTrade 63,420 AccountPayableTrade 32,160

InventriesInSimon 0 Borrowings 21,000


7 ShareCapital700,00

0

Land650,00

0 CapitalSurplus 80,065

TotalAssets833,22

5LiabilitiesAndStockholdersEq

uity833,22

5





2 ShareCapital700,00

0

Land650,00


TotalAssets840,07


uity840,07

5




InventriesInHervert 99,437 ShareCapital700,00

0

Land650,00


TotalAssets835,19


uity835,19

1

Unit: dora

9 Team 4


B/S



InventriesInSimon 17,630 Borrowings 21,000


0

Land650,00

0 CapitalSurplus102,70

8

TotalAssets848,30


uity848,30

8



InventriesInSimon 31,371 Borrowings 0


0

Land650,00


7

TotalAssets855,96


uity855,96

7


110,854 Round 9



InventriesInHervert 0 ShareCapital700,00

0

Land650,00


1

TotalAssets833,80


uity833,80

1





0

Land650,00


5

TotalAssets878,15

0LiabilitiesAndStockholdersEqu

ity878,15

0





0

Land650,00


9

TotalAssets864,26

9LiabilitiesAndStockholdersEqu

ity864,26

9

Unit: dora

10 Team 4


B/SToo many inventories seem to be a problem…We should have shifted inventories to cash

Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round 10

Round 11

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

200,000

250,000Time series of B/S (excluding Land and Share capital)

CashOnHandAndDeposit AccountReceivableTrade InventriesInSimon InventriesInHervert AccountPayableTradeBorrowings CapitalSurplus

Dora

11 Team 4


P/LRound 1

AdvertisingExpense 6,740

Sales147,0

30 Radio 6,000

CostOfSales97,86

6MagazineInSimo

n 280

GrossProfit49,16

4MargazineInHerb

ert 460

SellingGeneralAndAdministrativeExpenses

40,712 Wages

15,000

OperatingProfit 8,452 Freight-out12,11

2InterestExpense 660 RentExpense 4,000

OrdinaryProfit 7,792 Warehouse 2,860

Round 2AdvertisingExpe

nse 6,740

Sales134,0

65 Radio 6,000

CostOfSales75,68

8MagazineInSimo

n 280

GrossProfit58,37

7MargazineInHerb

ert 460


44,808 Wages

15,000

OperatingProfit13,56

9 Freight-out11,16


OrdinaryProfit12,90

9 Warehouse 7,900


nse 7,280

Sales159,4

65 Radio 6,000

CostOfSales90,26

6MagazineInSimo

n 500

GrossProfit69,19

9MargazineInHerb

ert 780


49,046 Wages

15,000


3 Freight-out12,53


OrdinaryProfit19,49

3 Warehouse10,23

0


nse 8,300

Sales158,5

50 Radio 6,000

CostOfSales94,00

2MagazineInSimo

n 500

GrossProfit64,54

8MargazineInHerb

ert 1,800


51,416 Wages

15,000


2 Freight-out12,45

6InterestExpense 1,260 RentExpense 4,000

OrdinaryProfit11,87

2 Warehouse11,66

0


nse 8,080

Sales152,1

25 Radio 6,000

CostOfSales91,32

6MagazineInSimo

n 280

GrossProfit60,79

9MargazineInHerb

ert 1,800


52,690 Wages

15,000



OrdinaryProfit 6,849 Warehouse13,41

0


nse 8,080

Sales155,7

09 Radio 6,000

CostOfSales101,3

65MagazineInSimo

n 280

GrossProfit54,34

4MargazineInHerb

ert 1,800


50,408 Wages

15,000



OrdinaryProfit 2,676 Warehouse11,00

0

Unit: dora

12 Team 4


P/LRound 7

AdvertisingExpense 8,700

Sales186,1

80 Radio 6,000

CostOfSales123,6

70MagazineInSimo

n 900

GrossProfit62,51

0MargazineInHerb

ert 1,800


48,132 Wages

15,000


8 Freight-out14,27


OrdinaryProfit13,11

8 Warehouse 6,160


nse 6,700

Sales177,4

80 Radio 4,000

CostOfSales110,9

69MagazineInSimo

n 900

GrossProfit66,51

1MargazineInHerb

ert 1,800


45,412 Wages

15,000


9 Freight-out13,79


OrdinaryProfit21,09

9 Warehouse 5,920


nse 4,740

Sales99,30

0 Radio 4,000

CostOfSales66,77

0MagazineInSimo

n 280

GrossProfit32,53

0MargazineInHerb

ert 460


36,336 Wages

15,000

OperatingProfit -3,806 Freight-out 9,296

InterestExpense 0 RentExpense 4,000

OrdinaryProfit -3,806 Warehouse 3,300


nse6,700

Sales176,2

40Radio 4,000

CostOfSales112,7

83MagazineInSimo

n900

GrossProfit63,45

7MargazineInHer

bert1,800


47,322

Wages15,00

0


5Freight-out

14,712


OrdinaryProfit16,13

5Warehouse 6,910


nse6,080

Sales159,9

45Radio 4,000

CostOfSales122,4

65MagazineInSimo

n280

GrossProfit37,48

0MargazineInHer

bert1,800


49,066

Wages15,00

0

OperatingProfit-

11,586

Freight-out15,69

6


OrdinaryProfit-

11,586

Warehouse 8,290

Unit: dora

13 Team 4


P/LToo much warehouse cost seems to be a problem…

Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round 10 Round 110

10,000

20,000

30,000

40,000

50,000

60,000

Time series of costs

Radio MagazineInSimon MargazineInHerbert WagesFreight-out RentExpense Warehouse InterestExpense

Dor

a

14 Team 4

D) Sales to the final round, current profit, and transition graph of surplus Sales to the final round

The drastic fall of sales on round 9 was disaster because of lack of inventories…

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

Round 7

Round 8

Round 9

Round 10

Round 11

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

147,030134,065

159,465

158,550152,125

155,709186,180

177,480

99,300

176,240159,945

Dora

15 Team 4

D) Sales to the final round, current profit, and transition graph of surplus Current profit to the final round

Current profit was really unstableEspecially round 9 and 11 was terrible

-15,000

-10,000

-5,000

0

5,000

10,000

15,000

20,000

25,000

7,792

12,909

19,493

11,872

6,8492,676

13,118

21,099

-3,806

16,135

-11,586

Dor

a

16 Team 4

D) Sales to the final round, current profit, and transition graph of surplus Surplus to the final round

Growth rate of surplus seems to be poor, as well as the falls on round 9 and 11

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

Round 7

Round 8

Round 9

Round 10

Round 11

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

35,792

48,700

68,19380,065

86,91589,591

102,708

123,807120,001

136,135124,549

Dor

a

17 Team 4

E) Success point in management

To minimize the purchase priceAimed to get the discount to minimize the purchase

price (only in case that we had enough inventories)

To keep the price high and a bit cheaper than competitorsAimed to get a bit much sales compared to others

(only in case that we had enough inventories)

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

Round 7

Round 8

Round 9

Roun...

Roun...65

70

75

80

85

90

9590

77 77

81 81

90 90

81

90

77 77

Purchase cost/unit

Dora

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

Round 7

Round 8

Round 9

Round 10

Round 11

0 20 40 60 80

100 120 140 160 145 150 150 150 150 150 145 145 150

140 150

145 145 145 150 145 149 145 145 150 130

105

Price

simon

herbert

18 Team 4

F) Reflection point in management

To control inventories on the optimal wayA lot of inventories on former half and less inventories

on latter half especially in HerbertIn result, we had much warehouse cost and lost the

opportunity for selling each


Round 11

0

200

400

600

800

1000

1200

1400

1600

1800

Inventory and procurement

Inventory simon Inventory herbert Procurement simon Procurement herbert

Num

ber o

f pro

duct

s

Too much inventories No inventories

Better rounds

19 Team 4

F) Reflection point in management

To control inventories on the optimal wayMisstook predicting the demand in both islands

Estimated too aggressive demand curve in both islands and that saturating condition will be coming soon

Cound not catch up with demand changes

Based on last session…

0 1 2 3 4 5 6 7 8 9 100

1,000

2,000

3,000

4,000

5,000

6,000

7,000 f(x) = 72.1428571428571 x² + 326.542857142857 x − 145.4R² = 0.996103954231667

f(x) = − 144.928571428571 x² + 412.071428571429 x + 5676.2R² = 0.996802949578713

simon Polynomial (simon)herbert Polynomial (herbert)

0 1 2 3 4 5 6 7 8 9 10 110

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

f(x) = − 12.1402486402 x³ + 249.715617716 x² − 758.68958819 x + 881.866666667R² = 0.996558960270813f(x) = 11.6678321678 x³ − 257.375291375 x² + 995.108391608 x + 5147.53333333R² = 0.985921019257755

Simon Polynomial (Simon)Herbert Polynomial (Herbert)

Real condition…

20 Team 4

G) Comparison and cause analysis

Comparison of salesInventory control is the most important

Have no a big difference even between top and low teams except for rounds having no inventories for low teams

It means that almost same price and sales amount were set in every team


Round 11

0

50000

100000

150000

200000

250000

Team 1 Team 2 Team 3 Team 4 Team 5 Team 6

21 Team 4


Comparison of current profitThe big difference of current profit

Top teams could keep the high current profit on average on all rounds

Current profits of low teams were not stable

Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round 10 Round 11

-40000

-30000

-20000

-10000

0

10000

20000

30000

40000


22 Team 4


Comparison of surplusStable growth is KSF

Top teams could keep the stable growth rate of surplus because of the stable current profit


Round 11

0

50000

100000

150000

200000

250000

300000


23 Team 4


Comparison of inventoryInventories of top teams are significantly stable

Top teams have never lost the opportunities for selling and kept too much inventories in both islands

It is obvious that lost teams have experienced the lack of inventories on former half in Simon and on latter half in Herbert

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

Round 7

Round 8

Round 9

Round 10

Round 110

20000400006000080000

100000120000140000160000180000

Inventory assets in Simon

Team 1Team 2Team 3Team 4Team 5Team 6

Round 1

Round 2

Round 3

Round 4

Round 5

Round 6

Round 7

Round 8

Round 9

Round 10

Round 110

20000

40000

60000

80000

100000

120000

140000

160000

Inventory assets in Herbert

Team 1Team 2Team 3Team 4Team 5Team 6

24 Team 4

H) Attached material Strategy policy

Developed the core strategy not to lose our aims in advance

This is the land mark when we see what we cannot expect

Composed of procurement and sales strategy mainly

25 Team 4

H) Attached material Developed the simulator to monitor the change

of surplus following input dataInput form of advertisement, price and procurement

Demand prediction

Inventory monitor

Cash flow monitor

B/S and surplus monitor

business simulation final

Business

demand control

demand of simon

final round

optimal procurement

objective objective

warehouse cost

freight cost

price expensive