DIGBY Corporation report

Student: Ivanna Savchenko

Professor: John Wetherell

Course: Business Strategy Simulation

Institution: EU Business School

2020
 2
List of content

1. Executive summary……………………………………………………..………………3
2. Digby 2020-2028 results…………………………………………..……………………4
3. Steps in all rounds (Marketing). Rounds 1-8…………………………………………5
4. Our strategies………………………………………………………….……………….11
5. Teamwork or does everyone do their part?…………………………………………12
 3
1. Executive summary

For each of the Digby team, this was the first experience of doing business and
making such decisions. At the very beginning, we did not understand that this
program is very close to real experience. We faced the challenge - how to manage
a multi-million dollar company?

We became top managers of a business that sells electronic sensors for cars,
telephones, elevators. But we were not alone in this market. Our competitors were
4 other companies.

Our main tasks were:

• Organize teamwork

• Come up with a strategy that will work

• Make decisions that will strengthen the strategy

In addition, we had four departments:

• R&D. Here we could create a new product and сhange it to improve.

• Marketing In this department, we set a price that would satisfy customers,

thought out how much money to spend on promo budget and sales budget. And
after that, we pluck out sales forecasts for next year.

• Production. In this section, we came up with how much it costs to produce a

product in order to sell and leave the minimum amount of product on hand.
Moreover, we did product automation and bought the opportunity to produce
more.

• Finance Here we calculated long term debt and our stocks. This is done to have
enough money for all our investments.

How do all departments interact?

All departments are very dependent on each other. Therefore, for example,
production cannot be done unless marketing and R&D are done before. Therefore,
each department must communicate with each other to make decisions. A good
example is that in Marketing we calculate the forecast of our sales and then it helps
us in the Production to draw the right conclusions about the amount of product that
we need to produce. In addition, we spend money on the manufacture of a product,
creating a new one or improving an old one, we spend money on promos, all this
should be controlled by the Finance Department. Because it is important that we
have this money and we do not go into the red. It is also important to say that when
 4
we change a product in R&D, we see its quality and what price we need to put in
Marketing depends on it.

2. Digby 2020-2028 results

1. Profit and cumulative profit. In 2020, Digby had a profit of $ 4,188,507. At the
very end, in 2028, we received a total profit of $ 11,731,300, an increase of $
7,542,793, when compared with the very first results. At the same time, Digby's
total profit fell to $ 1,229,379 by the end of 2028. These results are so due to a
mistake in the first round. After this error, the total profit is up to -8,501,777 US
dollars. In the end, you can see that we did a serious job and were able to earn
more than $ 11 million.

2. ROS (return on sales) is an indicator of how cost-effective we are. Over the

years, this indicator has been changing all the time and at the very end we
achieved the highest result for us 5%.

3. ROA (Return on Assets) is the rate of return; it showed our result in net income.
For 8 years, we were able to raise this figure from 4% to 9%. Although after the first
round, our rate was the lowest -6%.

4. ROE (Return on Equity) is our rate of return. He showed Digby's ability to profit
from shareholder investments. We started the simulation with an indicator of 8.7%
and ended with a result that is twice as much - 17%.
 5
3. Steps in all rounds (Marketing)
Round 1
This was the most unfortunate round for the Digby team. Because after it we were
in a very bad situation with a minus in profit and in all financial results. As we
analyzed later, the reason was that we incorrectly calculated finances and made
much more products than we could sell.

All this led to the fact that we still have a lot of unsaleable goods on hand.

How did we calculate the forecast and why were we in this situation? We
considered this method: market demand for that segment divided by the total of
customer survey points. Then multiplied by our products customer survey. After that
we added growth rate and a little additional like 10-15%. As it turned out, it was too
much.
Also in the first round we set almost the highest prices, we expected that our
product will be one of the best, so we can sell everything.
 6
Money for the promo budget and sales budget were set up so as to get a good level
of customer awareness and customer accessibility. As a result, with all our financial
indicators and a mistake, we did not reach the first place in the market share, but
we were not the last.

ВВЕДИТЕ ПОДПИСЬ.

Round 2
In the second round we had to focus all our attention on how to get out of a bad
situation. In order to sell all the goods that we had on hand, we almost did not
create a new product in the Production department.
In Marketing, we set lower prices to sell as much as possible. Although we did not
have much money, we did not save on a promo budget and sales budget, which
helped us achieve high results in customer awareness - almost 100% and customer
accessibility - more than 50%.
In addition, we focused on our three best products - Daze, Dixie and Dune. For
them, we made automation better and did not significantly reduce the price. But
special attention was paid to Dixie.
 7

Also in this round we created a new Dumbo product. We placed it on the territory of
the Dell product - Low-end sector. We decided to create a product where we have
the weakest product. Dell all the time during the simulation remained weak among
all our products.
As a result of our actions, we began to get out of the crisis.

Round 3
In this round, we continued to follow the strategy of overcoming the crisis. We
calculated the sales forecast very carefully. We managed to reach the indicator $ 0
Emergency Loan.
 8
In marketing, we continued not to save. We gave enough money to promote the

product and its availability. Our market prices were average among all our
competitors. Thus, we continued to earn profit.
Round 4
This was the first round in which we got a positive result in profit.

In this round, we tried to invest as much money as possible in improving products in

order to sell more product. As a result, we had almost all stock out. In marketing,
we decided to make strong advertising and promotion in order to maximize the
recognition and accessibility of the product. Which showed that our product is one
of the most recognizable among competitors.
 9
Round 5
In this round, we again had a problem, we went into the red. We have left a lot of
products not sold. But the biggest problem has arisen with our new Dumbo product.
We did not sell it at all. We later saw that, due to our random mistake, the price of
this product was $ 29. Although the maximum price for this segment could be $ 21.
These results led us to such a minus and again lowered down all the indicators.

Round 6
In this round, we did a great job in order to once again become a plus. We did it.
We sold everything we produced except our weakest Dell product. And because of
such poor results, it was decided to greatly reduce the price. Also in this round, we
corrected the situation with Dumbo. We set the right price that was right for the
customers. So we sold everything we had.
In Marketing, we started spending more money on customer accessibility, which
was about 70%. We have greatly reduced the costs of the promotional budget due
to the fact that our customer awareness was 95-100%.
 10
We also began to encounter the problem that we can produce more, our forecast
showed us the results above, but we simply did not have capacity on it. But buying
capacity no longer made sense, because we had the task of not spending a lot of
money, because we simply did not have them, and on the other hand, there were
only 2 rounds left before the end. That is why we found ourselves in such a
situation that everything except Dell had stock out and we were unable to reach
more customers.

Round 7
In the seventh round, we faced the same problem. All products are stock out.
Therefore, the calculation of the forecast has become meaningless. As much as we
could sell we could not produce.

ВВЕДИТЕ ПОДПИСЬ.

This was one of the last rounds in which our main task was to make money.
Because our cumulative profit has so far been in the red since the very first round.
That is, all rounds we only tried to get out of the crisis and earn money in order to
catch up with our competitors. That is, we understood that in order to complete the
simulation we would need to earn $11,000,000 in the next round.
 11
Round 8
Final round. We were able to earn $ 11,731,300 and came out in plus for all the
results. Due to a very serious mistake in the first round, our work can be called
“survival”. Because we could not show what we wanted and realize all our plans in
the simulation. Due to lack of money and the ability to create and change
something, we finished the simulation with the lowest market share result. Although
if you look at all the results, then for almost all products we have one of the best
qualities and we sold everything under stock out.
In order to make money in the last round, we decided to sell capacity to
manufacture a Dell product. Because it was the only product that did not take full
advantage of the opportunity. It gave us more money. Also, we no longer spent a lot
of money on the promotion and availability of the product. We realized that now we
need to get rid of everything in order to earn as much money as possible and spend
as little as possible.

4. Our strategies
We decided to use a differentiation strategy and focused on developing the two
Daze and Dixie products. We made these products one of the best among our
competitors and in the last rounds we had everything stock out. We tried to cover
as much of the market as possible. We also spent money on automation to make
the product better. But due to the fact that we did not have much money, we did not
set automation more than 6.0, because when automation above these results it is
 12
much more expensive to improve products in R&D and this could lead to product
blocking. This we could not afford.
Thus, we tried to invest as much money as possible in the development of these
two products and in the Marketing department in order to earn as much money as
possible after. It was this strategy that helped us achieve the result, catch up with
competitors and ultimately become a plus in all respects. After all, we immediately
understood that saving is a bad decision. Better to spend more money on
development. So we created some of the best products. But due to the fact that we
could not produce more, we did not cover more of the market than our competitors,
such as Chester.

5. Teamwork or does everyone do their part?

Our team has 4 people. The work began with the fact that we shared
responsibilities between all departments, I was responsible for Marketing. And after
the first round, we realized that we can’t do it without teamwork. At the very
beginning, we had to deal with the program and the processes in it. It was much
easier to do together. Then we began to understand that each department is very
dependent on the others. It was hard for each of us to do this separately. Digby
conclusion: Capsim is 100% team work.

All Digby team members used their knowledge and experience to make the most
accurate decisions. And despite some of the mistakes that were made in the first
rounds, our company began to work positively. This was our strategy, which we
have chosen almost from the very beginning: “A strategy of close teamwork”.
Together we made decisions, we were responsible together for a not very good
result and together rejoiced for the positive results that were only thanks to each of
the participants.