Final Team Analysis - Linkedin

Team End-of-Simulation Analysis – Digby West

November 26, 2014

Prepared by: Chao NB PhanEunice Fei Jin Shi

Brian Yan Muk

2

PERFORMANCE: Overall score, rank, and relative performance on individual score criteria after each round.

ScoreFor detailed scores for each round, refer to Appendix A.

Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 -

10

20

30

40

50

60

70

80

90

100

Scores Each Round

AndrewsBaldwinChesterDigby

RankFor detailed ranks for each round, refer to Appendix B.

Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 81

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3

4

Rank Each Round


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Performance in Individual CriteriaFor detailed performance in individual criteria, refer to Appendix C.

Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

Stock Price Each Round


Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

$300,000,000

$350,000,000

Market Cap Each Round


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Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8-40

-30

-20

-10

0

10

20

Average ROE Each Round


Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Leverage Each Round


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Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 81

2

3

4

5

6

7

8

9Credit Rating Each Round


Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 80%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Total Market Share (Units) Each Year


BBB BB B CCC CC C DDD DD D

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Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 80%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Total Market Share ($) Each Year


7

COST ANALYSIS: For the segment in which you make the most profit, analyze your company’s cost position at the end of the game.

Profitability Per SegmentDigby West’s most profitable segment is Traditional.

RoundTraditiona

l Low HighPerformanc

e Size TotalRound 0 $3,277 $5,539 $1,853 $478 $899 $12,046Round 1 -$1,108 -$485 $2,784 -$609 -$1,150 -$568Round 2 $1,803 -$1,008 $2,514 -$635 $888 $3,562Round 3 $4,423 $2,318 $6,367 $1,765 $3,783 $18,656Round 4 $5,735 $3,646 $5,386 $5,449 $6,530 $26,746Round 5 $12,551 $11,190 $10,408 $15,555 $18,181 $67,885Round 6 $18,894 $14,426 $7,500 $9,064 $11,764 $61,648Round 7 $12,461 $8,599 $12,214 $5,900 $11,576 $50,750Round 8 $12,811 $10,105 $9,724 $10,738 $9,148 $52,526 Total $70,847 $54,330 $58,750 $47,705 $61,619 $293,251

Unit Cost: What is the full unit cost for each competing product, broken down by specific cost components?For detailed list of all costs components for each competing product, refer to Appendix D.

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Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8$0

$5

$10

$15

$20

$25

Total Unit Cost Each Year (Traditional)


Note: Baldwin’s total unit cost is $0.00 because they did not sell any units in Round 8.


$2

$4

$6

$8

$10

$12

$14

Material Cost Each Year (Traditional)


Note: Baldwin and Chester’s material unit cost is $0.00 because they did not produce any units in Round 8.

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$2

$4

$6

$8

$10

$12

Labour Cost Each Year (Traditional)


Note: Baldwin and Chester’s labour unit cost is $0.00 because they did not produce any units in Round 8.

Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8-$5

$0

$5

$10

$15

$20

$25

Other Costs Each Year (Traditional)


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Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8

$0

$5

$10

$15

$20

$25

Breakdown Of Unit Cost Per Team Each Round

Material Cost Labour Cost Other Costs

Note: Baldwin’s total unit cost is $0.00 because they did not sell any units in Round 8.

Sources of Cost Advantage: Identify sources of cost advantage and rate each competitor thereon.

Andrews Baldwin Chester Digby

Sources of Cost Advantage

Importance

Input Costs

Material High -Average: $8.85-Decreased as approaching the end of the game

-Average: $9.41-Decreased as approaching the end of the game-Did not apply in Round 8 because they stopped producing Traditional

-Highest -Average: $9.86-Decreased as approaching the end of the game-Did not apply in Round 8 because they stopped producing

-Lowest-Average: $8.70-Decreased as approaching the end of the game.

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product Traditional product

Labour High -Average: $8-Did not have any significant decrease in labour costs

-Average: $7.83-Did not apply in Round 8 because they stopped producing Traditional product

-Highest-Average: $9.15-Did not apply in Round 8 because they stopped producing Traditional product

-Lowest-Average: $5.21-Decreased significantly since round 6

Inventory holding costs

Low -Lowest-Average: $0.60

-Average: $1.72-Did not apply in Round 8 because they stopped producing Traditional product

-Highest-Average: $3.39-Incurred high inventory holding costs in Round 8 ($20.28)

-Average: $1.06

Economies

Automation High -Average: 4-The maximum automation level was 6.

-Average: 4-The maximum automation level for Traditional was 6.5, but got transferred to Low-End since round 7

-Average: 4-Did not invest in automation for Traditional until round 7. -Only invested 0.5 for automation for Round 8 production.

-Highest-Average: 6-The maximum automation was 10

Capacity High -Average: 1517-Average of utilization rates: 99%-Average Production: 1725

-Lowest utilization rates and Production-Average capacity: 1500-Average utilization rates: 66%-Average Production: 1246-Reduce numbers of products=> may have high fixed cost/unit

-Largest capacity-Average capacity: 1522-Average of utilization rates: 86%-Average Production: 14324

-Highest Utilization rates and Production-Average capacity: 1483-Average of utilization rates: 112%-Average Production: 1739-Can spread the fixed costs over more products => reduce the fixed cost/unit

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TQM - Material Cost Reduction

Medium -Average reduction: 4.76%

-Lowest-Average reduction: 3.70%

-Average reduction: 7.48%

-Highest-Average reduction: 10.32%

TQM - Labour Cost Reduction

Medium -Average reduction: 3.73%



-Highest-Average reduction: 12.25%

TQM - Admin Cost Reduction

Low -Highest-Average reduction: 50.71%




Efficiency

Productivity High -Average productivity: 108.66%

-Average productivity: 101.46%

-Lowest-Average productivity: 100%

-Highest-Average productivity: 114.80%

Employee Satisfaction

Low -Average turnover rate: 7%

-Average turnover rate: 9.08%

-Lowest-Average turnover rate: 10%

-Lowest-Average turnover rate: 6.52%

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DEBRIEF: Analyze your company’s experience over the eight years.

Initial Strategy: Did your initial strategy change much?Overall, our initial strategy did not change very much throughout the game. As a team, we felt the preparation and thought put into earlier rounds in the game paid off in later rounds. We learned about certain aspects of the game in later rounds as we played and adjusted appropriately.

R&D Initial plan was to make necessary investments in R&D across all segments to meet ideal buyer

preferences - we maintained this strategy. Initial plan was to transition products to new segments in Round 4 (e.g. Traditional become Low

End, High End became Traditional) - we maintained this strategy.

Marketing Initial plan was to maintain high prices for High End, Performance, and Size - we maintained this

strategy Initial plan was to aim to lower prices for Traditional and Low End - we maintained this strategy. Initial plan was to maximize Marketing budget for 100% awareness and maximize Sales budget

for as much accessibility as possible (~80%) - we maintained this strategy. Initial plan was forecast each segment appropriately based on past market share and

competitors capabilities - we maintained this strategy to a degree. During later rounds, we could afford to produce more than we forecasted in case our competitors backed out of particular segments.

Production Initial plan was to produce a 10-20% than forecasted in marketing for each segment to produce

a worst-best case scenario - we maintained this strategy. Initial plan was to invest in capacity and automation as needed to meet potential market share -

we maintained this strategy.

Finance Initial plan was to leverage ourselves through long-term debt and issuing common shares in

earlier rounds to invest in R&D, Production, HR, and TQM - we maintained this strategy but we had to continue taking out long-term debt in later rounds in order to continue investments in Production and maintain an optimal leverage ratio. We were not able to buy back shares and retire long-term debt like we wanted to in later rounds.

HR Initial plan was to maximize investment in recruitment spend and training hours in order to

maximize productivity - we maintained this strategy.

TQM Initial plan was to maximize investment in TQM areas to reduce material costs, labour costs, and

R&D time - we maintained this strategy but we also were able to maximize investment in TQM areas to reduce admin costs and increase demand.

Decisions: What were you most and least effective decisions?

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Most Effective Decisions Keeping up in R&D and spending in Marketing and Sales allowed us to maintain market

leadership for High End, Performance, and Size segments to optimize buyer preferences, maximizing our customer survey score. Age, Performance, Size, and Reliability are maximized within the possible budget.

Taking advantage of the moving segments to reduce R&D costs for Low-End and Traditional segments

Maximizing spending on HR every round allowed us to increase our employees’ productivity, and satisfaction while reducing turnover.

Coming up with our own thresholds for TQM spending every round by calculating how changes in each TQM section’s spending can decrease costs or increase demand.

Investments in automation allowed us to reduce costs for Traditional and Low End segments to create a cost advantage over our competitors.

Increasing Account Receivable days from 30 to 45-60 to increase customer satisfaction. The lag also allowed us to adjust our cash ending position in case we have too much or short in cash as the year end.

Least Effective Decisions Overproducing for every segment for the purpose of meeting market demand resulted in excess

inventory, resulting in extra inventory holding costs. We spent the most in Marketing and Sales compared to our competitors, which resulted in

higher Awareness and Accessibility but it also reduced our net profits. We found our competitors did not spend as much on Marketing and Sales and were still able to yield relative sales - we may have been able to have higher net profits if we reduced our Marketing and Sales budget (but we wouldn’t be able to know if we would have sold the same with a lower budget).

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CAREER TAKEAWAYS: Lessons you will take away, regarding any of the following dimensions.

Takeaways: How to approach running a business? Strategy and decision-making is time-consuming and requires data gathering and research,

understanding and analyzing our options based on internal and external factors, and dedicating the time needed to make these decisions, despite being busy with everyday tasks (as a student, we have other classes and homework, as a professional, we have a never-ending to-do list)

Whenever possible, there needs to be a balance of making short-term and long-term decisions. Ideally we want to always focus on long-term decisions but we also need to be profitable in the short run and we need to be aware of how our short-term decisions impact our long-term strategy.

If you believe you can make greater returns compared to the interest rate when leveraging debt, we should borrow as much as we can to generate value and profits

There is a constant need to evaluate our competitors’ strategies, evaluate our own strategy, and ask “What-If” to make decisions – in most cases, we stuck with our strategy and made minor adjustments but we realize there may have been times we needed to make major shifts depending on various factors

There is a constant need to always learn from our mistakes as well as best practices made by others

We found one of the keys to our success was the fact that we had an in depth understanding of the rules of the games – this is similar to real life where understanding business best practices as well as the overall market and industry will allow you to create a competitive advantage

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FEEDBACK

What We Liked: What did you like about the simulation project? We were able to apply many of the business concepts and frameworks learned in class to

operate the stimulation company, such as the strategic position and relative source of advantage

We liked the idea of a moving segment because in real life, products get older, loses its value over time, and different customers have different buying criteria

The balanced scorecard is useful to get the projected results right after making decisions. We have to consider other competitors' possible decisions before making our final decisions.

This forced us to put ourselves in our competitor’s shoes to see what we would do in their position, including what they would do for their product strategy, pricing, production levels, and marketing/sales. This forced us to think of different scenarios and make a decision based on the strategy we thought they were going to take.

The simulation highlights the positive impacts of long-term investments; we had to make The simulation was forgiving to teams that made massive losses and seemed like they couldn’t

come back from their massive emergency loans We liked how the game was flexible in the sense that there are a variety of strategies we could

have taken We liked how the game had a recession in the middle rounds, making it more realistic and

reflective of real life

What We Didn’t Like: What did you find frustrating and/or recommend doing differently? It requires huge amount of time at the beginning to get to understand the game and how to

perform effectively. While this was fun, it was also very frustrating when we made decisions in earlier rounds that we thought were right but ended up working against us because of factors we didn’t consider, such as forecasting correctly and how that impacts our income statement.

We were frustrated at time when we worked hard to put together an ideal product segment and we believed we would get a greater market share and lost out to inferior products with less marketing and sales budget

Recommendations: It would be more valuable if there were more add-ons so we have more variables we can learn

with and have more options to differentiate our company from competitors We think the grading criteria should include the cumulative profit to avoid manipulating the

results More practice rounds would be useful for us to make trials and errors, while having more real

rounds can truly distinguish the winning and losing teams. We recommend having 3 practice rounds first, and having 2 real rounds in each of the following weeks.

We should have more time to learn about the simulation rules before starting the first practice rounds. We recommend starting the first practice round in Week 3 instead of Week 2. In Week 2, each group can have some in-class discussion on the simulation rules. If all teams are able to understand fully the simulation rules before the real rounds, then the final result is more likely to depend on the strategy of each team made in the real rounds.

APPENDIX A: SCORES EACH ROUND

Andrews

RoundStock Price Market Cap

Avg ROE

Credit

Leverage

Stock Points

MktCap Points

ROE Points

Credit Points

Lev. Points

SCORE

Round 1 $22.68 45,349,975 -3.29 CC 2.33 100.00 99.73 100.00 41.67 100.00 91.20Round 2 $24.02 46,978,456 -16 CC 2.33 100.00 100.00 50.44 41.67 100.00 83.82Round 3 $30.30 60,280,969 1.74 CCC 2.22 100.00 75.54 100.00 50.00 100.00 87.61Round 4 $35.11 69,268,009 3.09 CCC 2.14 80.40 52.66 100.00 50.00 100.00 76.17Round 5 $32.80 68,528,949 3.44 B 1.88 60.91 30.69 86.65 58.33 100.00 64.20Round 6 $10.76 26,963,965 -0.03 C 2.72 17.68 10.68 0.00 33.33 100.00 28.32Round 7 $1.00 2,506,969 -0.74 C 3.29 1.59 0.96 0.00 33.33 50.00 13.25Round 8 $42.04

100,145,743 1.47 B 2.04 54.85 33.16 9.37 58.33 100.00 50.98

Baldwin


Avg ROE

Credit

Leverage

Stock Points

MktCap Points

ROE Points

Credit Points

Lev. Points

SCORE

Round 1 $9.34 19,231,599 -13.07 CC 2.65 41.18 42.29 25.17 41.67 100.00 47.90Round 2 $12.76 27,640,052 -8.07 CC 2.35 53.12 58.84 100.00 41.67 100.00 66.61Round 3 $19.95 51,011,244 -4.49 CCC 2.19 65.84 63.92 0.00 50.00 100.00 58.33Round 4 $21.94 56,094,734 -2.97 CCC 2.22 50.24 42.65 0.00 50.00 100.00 48.61Round $22.28 56,970,016 -1.95 B 1.87 41.37 25.51 0.00 58.33 100.00 43.33

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5Round 6 $1.00 2,557,137 -6.36 C 2.77 1.64 1.01 0.00 33.33 100.00 20.78Round 7 $1.00 2,557,137 -15.04 DDD 3.54 1.59 0.98 0.00 25.00 0.00 4.50Round 8 $1.00 2,557,137 -18.03 CC 2.56 1.30 0.85 0.00 41.67 100.00 21.88

Chester


Avg ROE

Credit

Leverage

Stock Points

MktCap Points

ROE Points

Credit Points

Lev. Points

SCORE

Round 1 $1.00 2,145,970 -34.16 DDD 3.57 4.41 4.72 9.63 25.00 0.00 7.68Round 2 $1.00 2,038,970 -29.45 DDD 3.51 4.16 4.34 27.40 25.00 0.00 10.19Round 3 $23.82 46,142,798 -13.21 CCC 2.22 78.61 57.82 0.00 50.00 100.00 61.58Round 4 $43.67 84,596,227 -5.71 B 1.92 100.00 64.32 0.00 58.33 100.00 71.61Round 5 $10.72 24,915,559 -8.73 CCC 2.22 19.91 11.16 0.00 50.00 100.00 31.70Round 6 $17.32 38,244,443 -6.65 BB 1.86 17.68 10.68 0.00 33.33 100.00 28.32Round 7 $1.00 2,097,781 -9.85 C 3.34 1.59 0.81 0.00 33.33 0.00 5.72Round 8 $13.31 26,534,264 15.69 DDD 4.70 17.36 8.79 100.00 25.00 0.00 26.59

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Digby


Avg ROE

Credit

Leverage

Stock Points

MktCap Points

ROE Points

Credit Points

Lev. Points

SCORE

Round 1 $18.95 45,470,847 -11.77 CCC 2.28 83.55 100.00 27.95 50.00 100.00 75.94Round 2 $11.04 31,803,919 -9.4 CC 2.33 45.96 67.70 85.85 41.67 100.00 63.75Round 3 $23.09 79,801,024 -3.55 CCC 2.11 76.20 100.00 0.00 50.00 100.00 69.17Round 4 $31.72

131,530,136 -0.75 BB 1.88 72.64 100.00 0.00 66.67 100.00 70.42

Round 5 $53.85

223,299,278 3.97 BB 1.78 100.00 100.00 100.00 66.67 50.00 87.50

Round 6 $60.86

252,384,556 6.11 BB 2.01 100.00 100.00 100.00 66.67 100.00 95.00

Round 7 $62.80

260,406,265 7.12 B 1.90 100.00 100.00 100.00 58.33 100.00 93.75

Round 8 $76.65

301,965,785 8.15 BB 1.89 100.00 100.00 51.94 66.67 100.00 87.79

APPENDIX B: RANK EACH ROUND

RANK Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8Andrews 1 1 1 1 2 2 2 2Baldwin 3 2 4 4 3 4 4 4Chester 4 4 3 2 4 3 3 3Digby 2 3 2 3 1 1 1 1

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APPENDIX C: PERFORMANCE IN INDIVIDUAL CRITERIA EACH AROUND

Stock Price Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8

Andrews $22.68 $24.02 $30.30 $35.11 $32.80 $10.76 $1.00 $42.04Baldwin $9.34 $12.76 $19.95 $21.94 $22.28 $1.00 $1.00 $1.00Chester $1.00 $1.00 $23.82 $43.67 $10.72 $17.32 $1.00 $13.31Digby $18.95 $11.04 $23.09 $31.72 $53.85 $60.86 $62.80 $76.65

Market Cap Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8

Andrews 45,349,975 46,978,456 60,280,969 69,268,009 68,528,949 26,963,965 2,506,969 100,145,743Baldwin 19,231,599 27,640,052 51,011,244 56,094,734 56,970,016 2,557,137 2,557,137 2,557,137Chester 2,145,970 2,038,970 46,142,798 84,596,227 24,915,559 38,244,443 2,097,781 26,534,264Digby 45,470,847 31,803,919 79,801,024 131,530,136 223,299,278 252,384,556 260,406,265 301,965,785

Avg ROE Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8Andrews -3.29 -16 1.74 3.09 3.44 -0.03 -0.74 1.47Baldwin -13.07 -8.07 -4.49 -2.97 -1.95 -6.36 -15.04 -18.03Chester -34.16 -29.45 -13.21 -5.71 -8.73 -6.65 -9.85 15.69Digby -11.77 -9.4 -3.55 -0.75 3.97 6.11 7.12 8.15

Credit Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8Andrews CC CC CCC CCC B C C BBaldwin CC CC CCC CCC B C DDD CCChester DDD DDD CCC B CCC BB C DDDDigby CCC CC CCC BB BB BB B BB

Leverage Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8Andrews 2.33 2.33 2.22 2.14 1.88 2.72 3.29 2.04Baldwin 2.65 2.35 2.19 2.22 1.87 2.77 3.54 2.56Chester 3.57 3.51 2.22 1.92 2.22 1.86 3.34 4.70Digby 2.28 2.33 2.11 1.88 1.78 2.01 1.90 1.89

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APPENDIX D: UNIT COSTS FOR TRADITIONAL SEGMENT

Price Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8Andrews $28.00 $26.00 $25.25 $25.10 $26.00 $26.60 $22.50 $20.75 $18.50Baldwin $28.00 $25.00 $24.50 $24.50 $24.50 $25.00 $24.50 $22.00 $0.00Chester $28.00 $25.00 $25.00 $25.00 $25.00 $23.00 $28.49 $27.60 $26.00Digby $28.00 $26.10 $25.60 $25.10 $28.00 $24.15 $22.50 $19.30 $16.00

Material Cost Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8

Andrews $11.59 $9.80 $9.52 $8.72 $8.47 $7.80 $8.18 $8.08 $7.50Baldwin $11.59 $10.85 $10.28 $9.72 $9.04 $8.63 $8.09 $7.09 $0.00Chester $11.59 $10.85 $10.66 $9.85 $9.13 $8.06 $9.75 $8.99 $0.00Digby $11.59 $9.80 $8.95 $8.18 $9.67 $8.38 $7.69 $7.30 $6.78

Labour Cost Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8


Other Costs (Inventory Holding, Previous

Stock Cost) Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8Andrews $0.80 $2.37 $0.77 $0.17 $0.13 $0.47 -$0.07 $0.38 $0.34Baldwin $0.80 $2.31 $0.86 $0.32 $0.35 $0.23 $0.59 $8.33 $0.00Chester $0.80 $2.47 $1.11 $0.22 $0.17 $2.62 $1.05 $1.75 $20.28Digby $0.80 $2.34 $2.77 $0.86 $1.53 $0.28 $0.15 $0.39 $0.42

Total Unit Cost Round 0 Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8


Documents

Final Team Analysis - Linkedin