Team

ANDREWS (C44102)

Group Members
Kumar Kautuk 10DM78
KunalDutta 10DM079
Lakshmi DivyaVegiraju 10DM081
MadhurSemwal 10DM082
ManmeetWalia 10DM083
ManreetNarula 10DM085
MISSION STATEMENT

To ensure supply of high calibre products at competitive prices while meeting the company’s
commercial objectives as well as the interests of the shareholders and employees. We will
continue to invest in R&D to provide added value and exceed customer expectations.

ORIGINAL STRATEGY

Andrews has adopted a broad differentiation strategy to create maximum awareness and
brand equity and to be known as a maker of high quality and highly desirable products. We
will develop an R&D competency that keeps our designs fresh and exciting as they change in
appeal from High Tech to Low Tech. We will maintain our presence in all market segments
and spend heavily on advertising and sales to create maximum awareness and accessibility.
Our products will keep pace with the market, offering improved size and performance. We
will price above average. We will expand capacity as we generate higher demand.

Our vision is to offer premium products for mainstream customers: Our brands withstand the
tests of time. Our primary stakeholders are customers, stockholders, management and
employees. We have chosen the following tactics:

Our initial marketing strategy was to spend modestly on R&D and promotion and sales
budgets in the high, performance and size segment and price our products competitively in
the traditional and low segments. We planned to revisit our situation to improve awareness
and accessibility.

Our production strategy was to significantly spend the money necessary to set-up highly
automated plants for the products and to sell off the excess capacity over the next few years.

Initially, we planned to finance our investments primarily through stock issues and bond
issues and try to retire long term debts as soon as possible to reduce interest costs. However,
we had to change our financial objectives and plans over the rounds, learning from our
mistakes.
INTERNAL AND EXTERNAL ENVIRONMENT ANALYSIS

The sensor industry is divided into five main segments Traditional, Low, High, Performance
and Size. Products were placed in these segments based on their performance, size, age, price
and reliability.

The sensors industry began with identical financials to its competitors. Andrews created 5
products to compete in the industry Able, Acre, Adam, Aft and Agape.

To evaluate the environment, the strategy of the competitors has to be determined.

In all respects, our major competitor was Chester. It has invested well in promotions in all
segments and their pricing decisions helped them to grab the major chunk of the market
share.

Erie and Digby were two competitors we did not worry much about because their products
were consistently inferior and their investment in TQM was very low which further reflected
in their profits and market share.
ROUNDWISE ANALYSIS

This section contains an analysis of individual rounds from 1 to 8 along with the major
achievements in each one. All the figures mentioned are in $000.

ROUND 1

Objectives:

To meet customer expectations in the high, performance and size segments by providing
cutting edge technology.

To utilize capacity to the optimum level

To increase the market share in the low and traditional segments

To pay off long term debt as soon as possible and reduce interest costs on debt

To reduce future labour costs

Strategy

• Investing in automation by raising funds through issue of shares to reduce labour

costs
• Optimizing capacity by selling off excess plant aimed at cutting down idle time
• Cutting down interest costs by retiring debt and substituting it with issue of shares.
Major achievements:

• The market share was almost stable at 17.79% with Ferris leading the industry.
• We had the net profit $6137 which was highest in the industry.
• The stock price showed an increase of $8.05 while all the others companies except
Digby had falling share prices.
• Bond rating was BBB in this round.
• We managed a contribution margin of 26.7% with almost all the companies
maintaining the similar margin.
• Our leverage was 1.7 (Assets / Equity)
• We faced a stock out in low end and traditional segment with minimal inventory in all
other segments.
 • We had the highest market share High end, size and low end segments and second
highest in performance.

ROUND 2

In round 2, we were the only team who invested in training of our employees to increase their
productivity index. We also invested in plant improvements and automated to the required
levels in each segment. We had a stockout in low and high segments.

• The market share was almost stable at 17.51% with Chester leading the industry.
• We had the net profit $10974 (second highest).
• The stock price showed an increase of $11.41.
• Bond rating was improved from BBB to A due to early retirement of debt of $1000.
• We managed a contribution margin of 38.2% which was second highest in the
industry after Chester.
• Our leverage was 1.6.
• We faced a stock out in low end and high end segment with reasonable inventory in
all other segments.
• We had second highest market share in both – High end and low end segments.

ROUND 3

In round 3, we invested in recruiting and training employees due to which our productivity
index increased more than our competitors. This reduced our labour costs as compared to our
competitors. We paid dividends, retired long term debt and improved plant. We also tried to
utilize plant to the maximum. We had stock outs in high, performance and size segments and
our capacity utilization was very low.

• The market share was almost stable at 17.24% with Chester maintaining the lead.
• We had the net profit $16239 which was the highest in the industry.
• The stock price showed an increase of $19.03 due to payment of highest dividend in
the industry.
• Bond rating jumped to AA due to retirement of long term debt.
• We managed the highest contribution margin of 43.2%.
• Our leverage decreased to 1.5 due to repayment of debts.
 • We faced a stock out in almost all segments except traditional and low. In low
segment, a very high amount of inventory was left.
• We had highest market share in high end segment.

ROUND 4

In round 4, we invested in TQM and Human Resources to reduce our material and labour
costs in the coming years. We also tried to improve our capacity utilization. However, due to
inaccurate forecasts, we had stock outs in most of the segments due to which our competitor
Chester’s market share increased in the segments. We introduced a new product Agape in the
size segment with good performance and size coordinates, but lost the market share to our
competitor Chester’s new product Csize because of our low investment in promotion and
sales. Chester also introduced a new product in the high segment.

• The market share was at 16.28% with Chester maintaining the lead.
• We had the net profit $8326 which was second highest in the industry.
• In this round, the stock price of most of the companies fell with our stock price falling
just by $2.78.
• Bond rating was maintained AA as we.
• We managed a contribution margin of 45.4 % which was highest in the industry.
• Our leverage reduced to 1.4 from 1.5 in the last round.
• We faced a stock out in almost all the segments except the size segments (minimal
inventory left).
• We had the highest market share in High end and second highest market share in low
end segment.

ROUND 5

In round 5, we paid dividends to our shareholders and retired our long term debt to reduce
interest costs. We continued to invest in HR and TQM to reduce our material and Labour
costs. We did not have any stock outs in this round but were left with a lot of inventory in the
low and high segments.

The above decisions had the following effects:

 • Our total market share increased from 16.28% to 17%, although Chester continued to
be the market leader.
• We managed a net profit of $1,753,while all other companies except Chester were
running into losses.
• The stock price fell to $53.44 (second lowest fall in prices).
• Bond rating improved from AA to AAA due to repayment of approx. $12,000 debt.
• The contribution margin increased from 45.4% to 46.4% due to our pricing strategy.
• Our leverage reduced from 1.4 to 1.3 due to early retirement of current debt.
• There were no stock outs for any segments and we were left with high inventory in
low and high segments.
• We had considerable market share in traditional and performance segment.

ROUND 6

We again improved our capacity utilization and discontinued our new product in the size
segment (Agape) due to the recession. Chester however kept building on the sales through its
new products in the high and size segments which helped in taking hold of the maximum
market share. We invested in plant improvements, paid dividends and raised funds through
issue of stocks. We continued to invest in HR and TQM. The major achievements by the end
of this round were:

• The market share was almost stable at 16.68% with Chester maintaining the lead.
• We had the net profit $9015 while most of the other companies were running into
losses.
• The stock price showed an increase of $7.41.
• Bond rating was AA as we raised an additional debt of $10,000.
• We managed a contribution margin of 45% which was second highest in the industry
after Baldwin.
• Our leverage again reached 1.4 due to additional debts.
• We faced a stock out in low segment with reasonable inventory in all other segments.
• We had second highest market share in both – traditional and low end segments.
ROUND 7

In round 7, we improved plant and capacity utilization. We also retired debt of about $
21,000 in order to regain our AAA bond rating. We managed a labour cost reduction (through
negotiations) of 14% and a material cost reduction of 11%. There was a reduction in
Administration cost by 58.5% due to Total Quality Management.

• The market share in this year was 16.3% with Chester maintaining the lead.
• We had a net profit of $11999.
• The stock price went up by $14.95 raising the close price to $75.80.
• We could regain our bond rating of AAA due to repayment of debts.
• We managed a contribution margin of 44.6% which was third highest in the industry.
• Our leverage again reduced to 1.1 due to early retirement of debt.
• We faced a stock out in low segment with reasonable inventory in all other segments.
• We managed to capture the highest market share in high end segment followed by
second highest share in size, performance and low end segments.

ROUND 8

In round 8, we earned the highest profits. In terms of total sales the company managed to
generate revenues as high as $16,54,91,776 with profits of $2,60,90,819, which was highest
for the round. Our cumulative profits shot up to $9,47,22,461, putting us in the second
position right after company Chester. During this round the company managed to attain very
high contribution margins as well as Return on Equity.

• The market share in this year was increased to 17.4%.

• We had a net profit of $26091 which was highest in the industry
• We had the highest increase in stock price of $32.19.
• We could maintain our bond rating of AAA.
• We managed a contribution margin of 42.4% which was second highest in the
industry.
• Our leverage was stable at 1.1.
• We faced a stock out in low most of the segments with very low inventory in other
segments.
• We managed to capture the highest market share in almost all the segments except
high end (second highest).
 ROUND 1 TO 8 TRENDS:

Market Share Changes over the 8 rounds

Market Share (%)

18

17.5

17

16.5 Market Share (%)

16

15.5

The market share showed a steep increase from Round 0 to Round 1 followed by a
fluctuating pattern till Round 7 after which we managed to regain the falling share in the
industry and closed at 17.4%.
Share Price and Bond Rating Changes over the 8 rounds

Share Prices (Rs.)

120

100

80

60
Share Prices
40

20

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

The share prices consistently exhibited a growing pattern till round 3 followed by slight
fall in Rounds 4 and 5 (in accordance with industry trend). After Round 5, the share
price again increased and reached $108 which was the second highest in the industry.
Sales, Profits and Contribution Margin over 8 rounds

180.00
160.00
140.00
120.00
100.00 Sales (Rs. Million)
80.00
Profits ( Rs. Million)
60.00
ContrinuGon Margin (%)
40.00
20.00
0.00

The sales were consistently growing but went down in Round 5 due to recession in the
economy. As the condition improved, the sales started increasing again till Round 8.
Inspite of the fluctuating sales and contribution margin, we were able to manage a
constant profit throughout the 8 rounds.
UNEXPECTED EVENTS OVER THE ROUNDS

Till round 3, we did not spend much on promotions and sales. As a result, the major share in
those segments was grabbed by our competitors who promoted their products well.

In round 4, our major competitor (Chester) introduced a new product (Csize) in the size
segment which got a much better response from the consumers than the new product
introduced by us (Agape) which was not promoted well.
EVALUATION AND CONCLUSION

By the end of round 8, Chester was the market leader in terms of both Market share and
Profits. Our negligence in Promotion and sales budgets made us lose the market share to
Chester and forecasting errors lead to stock outs and excess inventory. Also, most of the
competitors have increased the automation beyond the minimum required levels whereas we
did not.
If we were to run the business all over again, we would increase our promotion and sales
budget and forecast demand better and increase the automation levels over the rounds.

TEAMWORK

Each team member has shown immense interest during the simulation and tried to gain the
best from the briefing sessions where we came to know of our right and wrong strategies. We
made a note of what went right and wrong in each round and brainstormed while making
decisions. We did not allocate any roles to the team members as that would have limited our
contribution to other functions.