Capsim Analysis

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I need 250-300 word answers on each question, I already answered each question I just need more information on each question to give me 250 words each

MBA 670 Project 3

Individual Analysis

 

 

Rachel Browne

Team Andrews

MediCorp

United States

Strategic Decision Making

MBA 670 9050

Professor Livingston

 

Project 3 Analysis Directions: Write your answers below each question. Please do not delete the questions.

 

  1. What strategy were you implementing? Give examples of any three decisions over the four rounds that were consciously driven by your chosen strategy. Explain.

In this simulation, we used Local, Cost Leader, and Broad for MediCorp.  By using the Eight Strategies in Capsim for reference, we implemented strategies to maintain our presence in both segments (broad) of the market in only one country (local).  In round 1, for example, The Plant Automation level was increased to improve margins.  Additionally, in round 1, we made the price = $27 (since it meets both section’s price requirement, but price matters most to low-tech, also this keeps us profitable).  Equally, in round 1 we decided to borrow = $3,500 up to $9,300.  For round 1, we decided to borrow $3,500 because the total amount we could borrow is $9,300. Banks tend to assume the worst and loan up to 50% of the amount requested. Half of $9,300 is $4,650 which is a difference of $1,150 less than 50%.

 

  1. Which country and customer(s) did you target with your product (high tech, low tech, or both)? Why? Give examples of two decisions in R&D and two decisions in marketing that you implemented over the four rounds to enable your desired targeting.

In round one, initially, our idea was to pick China.  Since our goal is broad and cost leader the intent was to select (1) country as the training material suggests on the course page. We choose to pick China. Our intent was to keep the cost as low as we could without using much funding for R&D with the goal of making the new numbers fall in the middle for both the low/high tech markets. Since cost is the focal point, the number was brought to $8.11 by round one. Which means technically we are below the $10-35 and the 25-45 range by the first round.  Round two of research and development we maintained the broad cost leader strategy. We kept the target of low cost by improving the positioning by 0.2 point from round 1 that was 6.5 to 6.7 which reduced the age from 1.6 to 1.4 and reduced material cost from $11.53 to $10.50.

 

  1. In the market segment that you were focused on, what do your customers want most? Did your market share for the country where your products are sold change over the four rounds? Comment on how it changed and why.

In our market segment, being the cost leader was most important to us.  We elected to maintain a fairly high visibility and invested in the promo budget enough to offset the annual 30% loss in visibility. Our product retained very high visibility throughout the rounds.  The plant in round one Issue (Borrow) = $1,200 up to $7,000.  Overall, we could have borrowed $7,000 for the year but instead of not having a high interest rate, we choose to borrow less funds to decrease our interest rate. Retire = $2,000 up to $12,200.  We chose to retire $2,000 early on Dec. 31 to the current closing cost instead of a higher closing cost for the next year.  Issue = $4,000 up to $8,200.  We would like to raise $4,000 this year by selling common stock to the public.  Buy Back = $500 up to $2,000.  We would like to spend no more than $500 to purchase outstanding common stock from shareholders.  Issue Dividend =$0.32 up to $2.87.  We would like to issue a dividend of $0.32 to our shareholders this year.  The, by round 4, we were at Borrow = $1,600 /7,600.  Banks loan up to 50% of the actual amount. Half of $7,600 is $3,800 and we asked for $2,200 less than that.  Issue (Borrow) = $6,600 /39,300.  We choose to borrow $6,600 instead of the entire amount to keep our interest rate lower and decrease the amount of money we would have to pay back to make.  Retire = $0 /8,000.  We chose not to retire early on Dec. 31 and decided to wait until Jan. 1.  Issue = $0 /12,500.  We did not sell common stock to the public.  Buy Back = $0 /3,100.  We did not try to purchase any common stock from the shareholders.              Issue Dividend = $0.00 /1.43.  We would like to issue a dividend of $0 to our shareholders this year.  Starting Cash Position 01/01/2024 = $0.  Cash from Operating =$11,935.  Cash from Investing =$0.  Cash from Financing = ($5,331).  Effects of Exchange Rate = $0.  Closing Cash Position 12/31/2024 =$6,604.

 

  1. Did you meet your potential demand in Round 1? Round 2? Round 3? Round 4? Hint: Look at Section 3 of the report (marketing). If you observed a stockout (inability to meet demand) in one or more rounds, pinpoint the reasons behind each instance.

Regions Selected for Sales – US.  For each region selected: Price – kept at $27 since it gained huge market share in low tech market.  Promotional Budget – remain at $2,300 to maintain visibility.  Sales Budget – remain at $2,500 to maintain accessibility.  Forecast – 1,750 since we have about 200 in stock and best case is 2,000 and our customer satisfaction went way down in high tech market.

 

  1. Based on Section 1 (High Level Overview) of the Round 1 Report, how did your sales results compare to those of the other five teams? If your sales results were extreme (top two or bottom two among the six teams), explain what other than sheer luck, caused that to happen. In other words, what decisions in Round 1 might have caused your sales to excel or suffer in comparison to its competition?

It looks like our sales were in the bottom (if not the lowest).  Looking at the reports, there were a few things we could have done differently.  I think if we increased automation more and lowered our prices in earlier rounds, we would have had a better competitive advantage.  The lowest was our group at $47,875 and the highest Ferris at $274,547.  Our team invested in the sales budget to provide ample accessibility. Our product maintained near 70% accessibility throughout the rounds.  As for price selection, we selected a lower price that was within range for both low tech and high-tech markets. Since price was more of a significant parameter for the low-tech market, we decided to lower the end of the intersect range. This gave us expanded market share in the low-tech market and boosted our customer satisfaction rating. We did not choose the absolute lowest price, despite our strategy to be cost leaders. Instead, we decided on the lowest price that resulted in positive net margin, so we remained profitable.

 

  1. Based on the Round 4 Report, were your sales after Round 4 higher or lower than your sales after Round 3? How do you explain this change in sales in view of your team’s decisions in Round 4?

Sales increased from $44,064 in round 3 to $47,875 in round 4.  This was because in round 4 we decided Regions Selected for Sales – US.  For each region selected: Price – kept at $27 since it gained huge market share in low tech market.  Promotional Budget – remain at $2,300 to maintain visibility. Sales Budget – remain at $2,500 to maintain accessibility.  Forecast – 1,750 since we have about 200 in stock and best case is 2,000 and our customer satisfaction went way down in high tech market.  We decided to improve the positioning with speed round for the continuum of broad cost leader strategy. We kept low-cost target by increasing in the position of 0.2 points from round 1 that was 6.5 to 6.7. This decision reduced the age from 1.6 to 1.4 and reduced material cost from $11.53 to $10.50. As for accuracy, our group kept the target of low cost also by improving the positioning to 0.2 points from round 1 that was 6.5 to 6.7. Both increase actions reduced the age and reduced material. For service life, we decreased 1000 hours from round 1. Service life was at 20,000 with the decrease it dropped to 19,000. So, our total R&D cost for R2 ended at $273. The logic behind our decision was to maintain both segments a low cost.

 

  1. Did you need an emergency loan in any of the four rounds? If so, why? If you did not need an emergency loan in any of the four rounds, explain the decisions that you made to ensure that your company would not need an emergency loan to survive.

We did not need an emergency loan because we kept the costs within our budget and did not go over budget.  Our competitive advantage was gained by keeping R&D, production, shipping and raw materials costs to a minimum, enabling the company to compete on the basis of price (cost leader).  Maintaining prices below average.  While, the Plant Automation level was increased to improve margins.

 

  1. Explain your capacity decisions, including whether or not to use a second shift in each round. Compare the available plant capacity in each round (first and second shift) versus the number of units produced. Was there idle capacity in any round? Is it possible that you could you have used capacity more efficiently while increasing your plant utilization? Explain why or why not.

When running your production line 24/7, capacity is the number of units you can produce in a full year.  Initially, we were at production of 1,560 of production and capacity of 1,700.  Then, in the second round, we moved up to 1,632 production and 1,800 in capacity.  And in round 4, we moved it up to 1,773 in production with a capacity of 2,000.  The Plant Automation level is increased to improve margins.  1st round—Capacity change of 100.  Automation moved to 4.5.  Production Order decreased to supply demand at 1,625 to keep excess inventory at a minimum.  In the 2nd round, I moved production order to 1,700 while increasing automation to 6.5.  In the 3rd round, I changed the capacity to 200 while increasing automation to 8.5.  And last, in the 4th round, I increased production order in the United States to 1,850 while increasing automation to max 10.0.

 

  1. See Finance Section of the Round 4 report. At the end of Round 4, do you have any current debt? Explain the presence or absence of current debt at the end of Round 4. At the end of Round 4, do you have any long-term debt? Explain the presence or absence of long-term debt at the end of Round 4.

Reviewing the end report for round 4 the is a current debt is $6,521.  Also, there is long term debt is a total of $13,400.  The presence of this long-term debt was generated from the loan and our team took longer than one year to pay the money back.  Moving forward, we can utilize our funding better to assist with any debt incurred early on.

 

  1. Did your team’s decisions in Rounds 1–4 always align with the chosen strategy? If you found yourself deviating from your strategy, explain why. In hindsight, what decisions would you have made differently? Explain.

Since our vision statement is low priced products for the local country: our brand offers solid value; we must ensure our customers are getting the best outcome.  So, I started with increasing automation.  For each point of automation I adjusted, labor costs fell by roughly 10%, which is why I continuously increased automation each round.  At a 10.0 production level, we will be relying heavily on robots doing most of the production. Additionally, by adjusting the order amount in each round, I was trying to keep inventory on hand at a minimum to try to keep the inventory overages under 100 each round, so there is no excess inventory nor is the company losing money on the unsold inventory.

 

 

 

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