The document provides a business report for the Dec. 1, 2012 General Shareholders Meeting of Alexander Islands. It summarizes the company's objectives to maximize cash inflows and minimize cash outflows. It analyzes revenue, costs, inventory levels, and sales and procurement strategies over 11 rounds. While surplus grew overall, inventory levels were too high and unstable demand led to losses in rounds 9 and 11 when inventories ran low. The company needs to better manage inventories and control costs like warehouse expenses to improve profits.
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Business simulation final
1. Dec. 1, 2012 General Shareholders Meeting
Business Report
-Alexander Islands-
1
2. Objective
Objective: To maximize the surplus
“Maximize the cash-in and Minimize the cash-out”
• Cash-out
• Cost of merchandise (70%
of total cost)
• Account payable (30% of
• Cash-in
last cost of merchandise)
• Cash revenue (60% of
• Advertise expenses
revenue)
• Wages
• Account receivable (40%
• Freight cost
of last revenue)
• Office rent
• Loan
• Warehouse
• Interest
• Repay
2
3. Objective
To maximize the cash-in…
Revenue
Price
Price sensitivity to quantity…?
Quantity
Optimal Inventory control…?
The best way is to keep the demand without reducing
the price and the lack of inventories
3
4. Objective
To minimize the cash-out…
Cost
Advertis
ement
Advertisement sensitivity to quantity…?
Wasteful
spending
Optimal Inventory control…?
Optimal procurement…?
The best way is to control the advertisement and the
procurement while getting the optimal discount
4
5. A) Enforcement of policy
Procurement strategy
Never 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 price
Important tips are...
1) Never keep too much inventory
2) Keep the procurement over 1,200 units as
much as possible
5
6. A) Enforcement of policy
Sales strategy
Aim to sell 10% above the average
Keep the price expensive (but a bit cheaper than
competitors)
1) Price is not sensitive to the demand
2) But we expected the accumulating effect
Change 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
6
7. B) Market status
Demand transition
Demand condition was drastically changed after round 5
Demand of Simon was higher than Herbert after round 7
Finally, demand was stable on final round
7,000
5,602
Number of demand
6,000
6,090 6,001 5,900
5,740
5,000
6,013 6,100
4,600
5,340
4,000
4,780 3,678
3,000
2,556 3,400
1,820
2,000
1,000
2,330
248
400
1
2
690
900
1,630
1,201 1,104
0
3
4
5
Simon
7
6
Herbert
7
8
9
10
11
10. C) B/S and P/L through the rounds
B/S
Too many inventories seem to be a problem…
We should have shifted inventories to cash
250,000
Time series of B/S (excluding Land and Share capital)
200,000
150,000
Dora
100,000
50,000
0
-50,000
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round
10
Round
11
-100,000
-150,000
-200,000
CashOnHandAndDeposit
AccountReceivableTrade
InventriesInSimon
AccountPayableTrade
Borrowings
CapitalSurplus
10
InventriesInHervert
13. C) B/S and P/L through the rounds
P/L
Too much warehouse cost seems to be a problem…
60,000
Time series of costs
50,000
Dora
40,000
30,000
20,000
10,000
0
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round 10 Round 11
Radio
MargazineInHerbert
Wages
Freight-out
13
MagazineInSimon
RentExpense
Warehouse
InterestExpense
14. 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…
200,000
180,000
159,465
160,000 147,030
134,065
140,000
Dora
120,000
100,000
155,709
158,550
152,125
186,180
177,480
176,240
159,945
99,300
80,000
60,000
40,000
20,000
0
Round Round Round Round Round Round Round Round Round Round Round
1
2
3
4
5
6
7
8
9
10
11
14
15. D) Sales to the final round, current profit, and
transition graph of surplus
Current profit to the final round
Current profit was really unstable
Especially round 9 and 11 was terrible
25,000
19,493
21,099
20,000
16,135
15,000
Dora
10,000
5,000
12,909
7,792
13,118
11,872
6,849
2,676
0
Round Round Round Round Round Round Round Round Round Round Round
1
2
3
4
5
6
7
8
9
10
11
-5,000
-3,806
-10,000
-15,000
15
-11,586
16. 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
160,000
136,135
124,549
123,807
120,001
140,000
120,000
102,708
Dora
100,000
80,065
80,000
86,915 89,591
68,193
60,000
48,700
40,000 35,792
20,000
0
Round Round Round Round Round Round Round Round Round Round Round
1
2
3
4
5
6
7
8
9
10
11
16
17. E) Success point in management
To minimize the purchase price
Aimed 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
competitors
Aimed to get a bit much sales compared to others
(only in case that we had enough inventories)
Price
Purchase cost/unit
95
90
90
90
90
160
140
85
Dora
90
120
80
81
77
77
81
81
145
150
150
150
150
150
145
145
150
145
145
145
150
145
149
145
145
150
77
40
70
20
65
105
80
60
75
150
130
100
77
140
simon
herbert
0
Round Round Round Round Round Round Round Round Round Round Round
1
2
3
4
5
6
7
8
9
10
11
17
Round Round Round Round Round Round Round Round Round Round Round
1
2
3
4
5
6
7
8
9
10
11
18. F) Reflection point in management
To control inventories on the optimal way
A lot of inventories on former half and less inventories
on latter half especially in Herbert
In result, we had much warehouse cost and lost the
opportunity for selling each
1800
Inventory and procurement
Number of products
1600
1400
Better
rounds
1200
1000
Too much inventories
800
No
inventories
600
400
200
0
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round 10 Round 11
Inventory simon
18
Inventory herbert
Procurement simon
Procurement herbert
19. F) Reflection point in management
To control inventories on the optimal way
Misstook 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…
12,000
Real condition…
10,000
y = -144.93x2 + 412.07x + 5676.2
R² = 0.9968
10,000
9,000
8,000
8,000
7,000
6,000
6,000
4,000
5,000
2,000
4,000
0
-2,000
y = 11.668x3 - 257.38x2 + 995.11x + 5147.5
R² = 0.9859
y = -12.14x3 + 249.72x2 - 758.69x + 881.87
R² = 0.9966
3,000
0
2
4
6
8
y = 72.143x2 + 326.54x - 145.4
R² = 0.9961
-4,000
-6,000
10
2,000
1,000
0
0
simon
19
herbert
1
2
3
4
Simon
5
6
Herbert
7
8
9
10
11
20. G) Comparison and cause analysis
Comparison of sales
Inventory 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
250000
200000
150000
100000
50000
0
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round Round
10
11
Team 1
Team 2
Team 3
Team 4
Team 5
Team 6
20
21. G) Comparison and cause analysis
Comparison of current profit
The 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
40000
30000
20000
10000
0
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round 10 Round 11
-10000
-20000
-30000
-40000
Team 1
21
Team 2
Team 3
Team 4
Team 5
Team 6
22. G) Comparison and cause analysis
Comparison of surplus
Stable growth is KSF
Top teams could keep the stable growth rate of surplus
because of the stable current profit
300000
250000
200000
150000
100000
50000
0
Round 1 Round 2 Round 3 Round 4 Round 5 Round 6 Round 7 Round 8 Round 9 Round 10 Round 11
Team 1
22
Team 2
Team 3
Team 4
Team 5
Team 6
23. G) Comparison and cause analysis
Comparison of inventory
Inventories 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
180000
160000
Inventory assets in Simon
160000
140000
140000
Inventory assets in Herbert
60000
120000
Team 1
100000
Team 2
80000
Team 3
Team 4 60000
40000
Team 5 40000
Team 5
20000
Team 6 20000
Team 6
0
0
120000
100000
80000
23
Team 1
Team 2
Team 3
Team 4
24. 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
24