Business

Simulation
Reviewer: Prof. Vivek Kumar

Submitted by: Team - H (Himalayas)

Madhurendra Madhukar MBAWX1914
Parivesh Karakoti MBAWX1920
Pawan Kumar Verma MBAWX1922
 Strategy at Beginning Stage
Entire planning based on market outlook

focus on Market share, Production capacity and Finance

Maximum In-house manufacturing capacity building

Major investments in buying technology and design licenses

Selling of products on higher margin

Issuance of Shares and Dividend

Minimal debt in company, long as well as short-term

Selling of variety of products in market

Selling of unique technology in market to create monopoly

Strategy at later stage
Identified the best technology to produce based on market network coverage forecast

focused on selling only two technologies at a time in every market

Selling price based on market survey

Considered transfer pricing & Statutory Tax for calculation of selling price

Selling of product on minimum profit and sometimes on no profit-no loss

Discontinued further R&D investments to lower down the fixed cost

Started maximizing outsourced manufacturing to lower the manufacturing cost

Good promotional expenses to make company presence

Parameter Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round 10 Round 11 Round 12

Sales revenue 701788 1012171 1326685 1499735 1911888 2234813 3835098 4239769 4080504 4093878 3148825
1 007 183
Promotion 14000 23000 10000 150000 140000 140000 112000 104000 108000 150000 140000 140000

R&D 270000 1302000 0 0 300000 55000 55000 110000 0 0 0 0

OPERATING PROFIT BEFORE

160644 -1168127 -299536 -107286 -154786 285857 289252 424312 1012511 1058497 998181 509815
DEPR. (EBITDA)

PROFIT BEFORE TAXES 43988 -1287994 -164239 -894081 -956222 -517337 -505706 -300682 528466 703515 739470 312344

Profit for the round -4501 -1360547 -250467 -894081 -964226 -517337 -538715 -349610 350136 660707 656786 312344

Cumulative total shareholder

0.44 -51.37 -77.4 -99.05 -97.6 -43.7 -3.82 -19.47 -7.23 -2.94 -0.53 -1.21
return (p.a.), %
Operating profit before
15.95 -166.45 29.59 -8.09 -10.32 14.95 12.94 11.06 23.88 25.94 24.38 16.19
depreciation (EBITDA), %
Return on capital employed
2.15 -47.26 -1.64 -18.92 -20.84 -5.84 -29.35 4.76 37.78 36.96 28.52 10.36
(ROCE), %

Global market shares, % 8.69 4.24 7.04 10.77 7 8.07 11.16 19.57 20.09 19.65 17.66 16.91
 25
Global market shares, % Sales revenue
20
4500000
4000000
15
3500000
3000000
10
2500000

5 2000000
1500000
0 1000000
1 2 3 4 5 6 7 8 9 10 11 12
500000
0
1 2 3 4 5 6 7 8 9 10 11 12

Return on capital employed (ROCE), % Cumulative total shareholder return (p.a.), %

60 20

40 0
1 2 3 4 5 6 7 8 9 10 11 12
-20
20
-40
0
1 2 3 4 5 6 7 8 9 10 11 12 -60
-20
-80

-40 -100

-60 -120
 Promotion R&D
160000
1400000
140000
1200000
120000
1000000
100000
800000
80000

60000 600000

40000 400000

20000 200000
0
1 2 3 4 5 6 7 8 9 10 11 12 0
1 2 3 4 5 6 7 8 9 10 11 12

Profit for the round Operating profit before depreciation (EBITDA), %

1000000
50

500000
0
1 2 3 4 5 6 7 8 9 10 11 12

0
1 2 3 4 5 6 7 8 9 10 11 12 -50

-500000
-100

-1000000
-150

-1500000
-200
Trade-Offs at Beginning Stage
Nil production of Tech-3 and Tech-4

Price war

Promotional Expenses

No Long-Term and Short-Term Debt

Conservative approach in market share decision

Trade-Offs at later stage
Nil production of Tech-1 and Tech-3

No Short-Term Debt

Partial overlook of market outlook

Aggressive market share decision

Nil R&D Investment

Mistakes done during the stint
Huge investment at the beginning which increases our fixed cost - biggest mistake

Huge fixed cost affected our overall profitability

Overlooked company promotion in market

Overlooked market outlook

Overlooked Logistics costs and Taxes while deciding the selling price

Issued shares and dividends to increase.

Internal loan transfers to USA which affected the profitability of our other markets

Underutilization of In-house capacity

Breakthrough
Optimum utilization of In-house as well as Outsources capacity

Maximized our market share

Low selling price considering the market survey and the overall costs including transportation

Focused on production of specific technology throughout the stint

Pricing and promotion based on market survey viz. Mixed approach for USA, Low Price in Asia and
High features and promotion in Europe
Learnings
Investment need to be done in phased manner

Pricing to be done considering all pricing factors viz logistics, taxes etc.

New Plants should not be constructed when negative operating cash flow

Giving dividends when having negative cash inflow

Should have Long term debt to finance negative operating cash flow
Thank You
“I don’t believe in taking right decision.
I take decisions and then make them right.”
~ Ratan Naval Tata