INDR D07

Submitted to Aman Garg 17p184

Dr. Ritu Srivastava SERVICE CHALLENGE: Leslie Pinto 17p202
Piyush Sharma 17p212
Dr. Kirti Sharma
Dr. Chinmaya Kulshreshtha
MARKETING SIMULATION Sanjana Jain 17p222
Siddharth Tandon 17p226
Venika Singhal 17p235
 SUCCESS CRITERIA

To achieve an increase in sales

A strong sales performance is important for firms to sustain their current business as well as to further
expand into newer markets.

Further a strong revenue growth will help the firm to compete with other firms and dominate the market.

Stable sales gives major cash inflows to the company that can help the company to afford an increase inits
expenditure on various items like raw materials, operating expenses and taxes.

By having an opportunity to expand the business, we would have a challenging task lying ahead of us of efficiently
utilising sales & promotions as well as inventory management and QoS while running the business.
 BUSINESS STRATEGY
Our targeted income source are L1 and L2 services and with a combination of price and
quality, sustain and grow market share in these markets
Position the product as a better quality offering among competitors, in a price-sensitive market
operating under thin margins
Key strategy to maintain healthy operating profit margin
Retaining existing clients creating brand value by improving quality standards
Attracting new clients focusing on promotional spend
Aggressively adding new units and constantly working to ensure that fully capacity utilization
happens
 YEAR WISE DECISION REVIEW
The sales growth was
The sales growth was -5.7% -12% and income
and income growth growth decreased by We have planned for
decreased by -6.0% and no -5% and no capital the sales growth to
capital gearing. Assets gearing. Assets increase
increased by 7.8% decreased by 5.7%

Year 2 Year 4 Year 6

Year 1 Year 3 Year 5

The sales growth was The sales growth was The sales growth was -10%
4.7% and income growth -4.3% and income and income growth was
was 5% and no capital growth was -4% and almost -11% and no capital
gearing. Assets no capital gearing. gearing. Assets decreased by
increased by 19% Assets increased by 18%
4.3%
 PERFORMANCE OVER THE YEARS
Sales
600000
Years Sales
500000 466755
488880 Y0 466755
460635
440800 Y1 488880
387060
400000 Y2 460635
345550
Y3 440800
300000
Y4 387060
Y5 345550
200000

100000 Current CAGR is -5.8% and

therefore we were not able
0 to meet our targets, except
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 the sales growth that we
Sales achieved in the first year
 RETURN ON ASSETS (ROA)
ROA
600000

500000

400000

300000

200000

100000

0
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5
ROA
RETURN ON EQUITY (ROE) ANNUAL GROWTH %
ROE (growth %)
25

21
20
18

15 14
13

10

5
5

0
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

-5

-8
-10

ROE
 EVALUATION SUCCESS OR FAILURE?
Metric Year 1 Year 2 Year 3 Year 4 Year 5
Sales Income 488,880 460,635 440,800 387,060 345,550
Capital Gearing 0% 0% 0% 0% 0%

Our venture was a failure, since the the current CAGR for the past 5 years has been
-5.8% which is one of the worst in the region
The negative operating profit growth and negative net income growth reflects the
strategy of keeping the prices constant and creating a niche for our brand was
unsuccessful
Despite an initial increase in ROE, it too declined at a later stage which meant we were
not generating the required returns for our investors
 LEARNINGS
Game Specific:
Like our competitors, we could have reduced the price of various services in order to make the
price more competitive.
There was a need to spend more wisely on quality improvement of resource A and resource B.
The need for quality improvement should have been properly understood before allocating
the required amount to each of the resources. This would have led to reduction in expenditure
and therefore, led to a rise in net income.
We realised that we needed to decrease our dependence on long term loans since they
couldnt be repaid due to negative profits we generated. The focus on asset acquisition that
required long term loans pushed our company into excessive debt. The negative income
growth further aggravated the debt burden on the company since the cash reserves went very
low over the years.
 LEARNINGS
Game Specific
We followed a skimming strategy by keeping our prices higher but that couldnt generate the
required results. Therefore, in year 6, we changed our strategy and reduced our prices
significantly to regain our market share.
We started with an aggressive approach, keeping the promotion and quality spend on the
higher side. Due to this, we got left behind the competitors during the initial cycles. Realizing
this late in the game, we made the necessary corrections, compensating for the initial excess
budget allocation.
The capital gearing ratio for our company was also quite low along with the constant
reduction in various financial ratios like Return on Equity, Return on Assets and income margin
ratios.
 LEARNINGS
Overall:
It is extremely important to understand the relationship between various factors affecting the
business:
1. With any increase or decrease in promotion/ quality expense, the production capacity
also needs to be adjusted appropriately.
2. However, increasing the production capacity requires significant capital expenditure
therefore companies need to maintain a balance by keeping a check on capital
gearing.
3. Moreover, other factors such as elasticity of demand, economies of scale and
incremental benefits of capacity expansion need to be evaluated before moving ahead
with the decision.
Promotion expense and quality improvement are both equally important factors for success of
the business. However, there needs to be a balance between the two components because
both go hand in hand and increasing one in isolation while neglecting the other can lead to
adverse consequences on sales and profits in the long term.
 LEARNINGS
Overall:
Higher prices as compared with those of competitors may not always lead to increase in sales
or creation of a niche market; in a highly competitive market such as the one in the simulation,
the optimal strategy is to price the products/ services around the average market price and
focus on quality and promotion to differentiate the product and increase market share.
Different service levels seemed to represent different stages of the product life cycle and
gave us an opportunity to apply the marketing concepts learnt in the classroom in a simulated
real-life market environment, enabling us to gain useful insights into managing products/
services in different stages of their life cycle.
The most important learning was that the business strategy should be flexible & adaptable to
absorb the dynamic market conditions. A fixed focus on creating a niche for your product
may not always work and can be detrimental to the financial health of the company.
 LEARNINGS
Overall:
The debt should be raised in a balanced manner and the debt-equity mix should be such that
it doesnt create a burden for the company in case of lower incomes. The interest payments on
the debt are an important part of debt and with negative income, it becomes difficult to
repay the required debt.
Acquisition of assets to improve productivity should be simultaneously supported by an
improvement in productivity and it should not be that we are paying for depreciation without
even utilizing the assets in the most efficient manners. Disposing off unutilized assets in this
case could have led to increased liquidity that could have helped to ease out the debt
burden on the company.
Thank You