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Corporation -- A Global Business Simulation

Corporation -- A Global Business Simulation. Presented by: John Doe Jane Doe Mary Jane. Company Background. DEEP BLUE INTERNATIONAL, INC A multi-divisional firm operating in the highly competitive information systems industry.

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Corporation -- A Global Business Simulation

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  1. Corporation-- A Global Business Simulation Presented by: John Doe Jane Doe Mary Jane

  2. Company Background DEEP BLUE INTERNATIONAL, INC • A multi-divisional firm operating in the highly competitive information systems industry

  3. Company Background

  4. Company Background • Two level decision making process • SBU: President • Parent corporation: • CEO • Board of Directors

  5. Mission Statement To be the market leader in the information industry through the establishment of competitive advantages so as to increase the value of the company.

  6. Strategy • Target on High-end product consumers • Strategic development on “vertical” applications • Achieve competitive advantages by Increasing marketing, operation technology new product research and HR investment.

  7. Operation of SBU #1 • Pricing Strategy: High end and keep increasing because of market demand and lost sales. • Constant improvement and moderate more expense than industry average in: -Marketing Expenses -Operations Technology -Quality Budget -New Product Research -Human resource Budget • Export Strategy : Start export to ASEAN (Area 2) in Period 4, based on competitive advantages already set up and little competition in ASEAN.

  8. Final Result (SBU #1) • Capacity: from 3610 to 3710 units (3% ) • Book value: from $3500 to $3600 (3% ) • Export: area 2, 15.1% • Sales: from $ 1879 to $ 2518 (34% ) • Cost of sales: $913(49%) to $1053 (42%) • Profit: $198 to $426 (215% ) • SBU profit/sales: from 11% to 17% (All numbers in thousands)

  9. Operation of SBU #2 • Pricing Strategy: competitive in high end • Constant improvement and moderate more expense than industry average in: -Marketing Expenses -Operations Technology -Quality Budget -New Product Research -Human resource Budget

  10. Operation of SBU #2 • Capacity expansion Strategy: - Constant moderate expansion based on market demand increase - Major expansion in Period 6 based on competitive advantage, lost sales and demand increase • Export Strategy: - Export Area: MERSUR (4) - Capacity availability - Little competition in the market

  11. Operation of SBU #2

  12. Final Result (SBU #2) • Capacity: from 4750 to 5225 units (10% ) • Book value: from $4253 to $4775(12% ) • Export: area 4, 15.7% • Sales: from $2569 to $3239 (26% ) • Cost of sales: $1237(48%) to $1421(44%) • Profit: $380 to $537 (41% ) • SBU profit/sales: 15% to 17% (All numbers in thousands)

  13. Operation of SBU #3 • Pricing Strategy: competitive in high end • Constant improvement and moderate more expense than industry average in: -Marketing Expenses -Operations Technology -Quality Budget -New Product Research -Human resource Budget

  14. Operation of SBU #3 • Capacity expansion Strategy: - Conservative expansion from Period 1 based on market demand increase - sharp expansion in Period 2 based on competitive advantages and lost sales - moderate expansion in Period 4. • Export Strategy: - Export Area: NAFTA (1) and MERSUR (4) - Capacity availability - Little competition in these markets

  15. Operation of SBU #3

  16. Final Result (SBU #3) • Capacity: from 5415 to 6545 units (21% ) • Book value: from $5762 to $6355 ( 10% ) • Export: area 1 , 12.7% area 4, 12.8% • Sales: from $3376 to $3603 (7% ) • Cost of sales: from $1631(48%) to $1594(44%) • Profit: $362 to $514 (42% ) • SBU profit/sales: from 11% to 14% (All numbers in thousands)

  17. Result (SBU level)

  18. Result (SBU level)

  19. Capacity Analysis

  20. Capacity Analysis

  21. Problem Areas • Cash management • Sales forecasting • Pricing

  22. Corporate Decisions • Based on the SBU decisions • Sales forecast • Pricing • Immature market • Domestic • International expansion • Financial management

  23. Capital Structure • Capital Needs: • Expand capacity for each SBU according to sales forecast in 1st period • Aggressively expand capacity of SBU#3 in 2nd period • Constantly Increase marketing, operation technology and new product research budget • Human resource expenses • Export & marketing abroad

  24. Capital Structure • Decision Criteria: • Increase shareholders’ value • Not dilute EPS and stock price • Keep reasonable D/E ratio • Plan of action: • Borrow 1000 bank loan in 1st period • Borrow 400 bank loan and issue 2000 bond in 2nd period • Pay back bank loan in the following period by using internal generated cash flow

  25. Ratio Analysis

  26. Dividend Policy • In 1st period, we kept the previous dividend level • We decreased the dividend payment in 2nd period • We decided to follow a constant amount plus extra payment policy since 3nd period • We started by paying $.03 and kept increasing the level of dividend according to our operation profits increase.

  27. Dividend Policy

  28. Incident Report (E) • New Advertising Campaign in Period 5 • Emphasizes our presence in the market in terms of growth in sales and profits. • In major business publication and airline or-board magazines. • Response: Key decision makers in major corp. are reached, smaller businesses are missed.

  29. Incident Report (F) • New Business Tactics in Period 6 • Host a party and provide image building items in export areas • Cost: $ 15,000 • Effective promotion • Legal promotion

  30. Performance Evaluation DEEP BLUE INTERNATIONAL, INC. Period 1 ----------- Period 6

  31. Financial Statement----balance sheet

  32. Financial Statement---- income statement

  33. Competitive Advantages

  34. Evaluation: Profitability

  35. Evaluation: Stock Price

  36. Evaluation: EPS

  37. Evaluation: Returns

  38. Ratio Analysis

  39. Strategy Adjustment

  40. Strategy Adjustment • Initially, we wanted to strategically expand SBU#3 • Based on the profit/cost efficiency analysis, we change the strategy to follow a more balance expansion plan • In the latter period, we reduced the capacity of SBU#3 by depreciation, while kept the reasonable operation budget

  41. Management Audit Performance Summary • How many times the team have a zero cash balance, requiring an overdraft loan 1 • How many times was there an excess amount of cash that was not invested 5 • How many period did you have lost sales 6 • Total number of lost sales units 4449 • Total capacity for all SBUs in the last period 15480 • Total amount spent on market research 186 • What are your total profits 4021 • What was your average stock price 16.49

  42. Q & A Thanks a lot! Good luck in the real world!!

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