Word document attached with 3 rounds Need 4th round to be written based on 4th round REPORT (ATTACHED ) with below strategies : Current Financial State Implemented Strategies Rationale following th
Introduction
The criteria for evaluating a company include profit, market share, stock price, and bond rating. “It is now widely recognized that one of the main determinants of business profitability is market share” (Nithin Geereddy, 2013). Chester Corporation considers market evaluation through high market share as the most important factor. Therefore, our strategy focuses on increasing market share through price competitiveness rather than profit. To increase its market share, we decided to adopt Broad Differentiator among the strategies used mainly in Capsim and revised our detailed strategies according to each round's progression. For teamwork, Chester Corporation thoroughly understands the Capsim manual before the round, exchanges opinions, and seeks trade-offs while avoiding serious opposition during all rounds.
Round 1
Current financial state –
To evaluate the current state of the company these are some statements that need to evaluate and overview their data information, visions through their estimated budgets, financial activity of the last five years, reports from their directors, auditors, and management.
So according to the annual report of Chester 2020-2021
According to the cash flow statements of the company the situation of the company is getting worse, in the current situation, they are facing a loss ($5544) and this condition is happening because the company is currently taking a huge large amount of the debts. That’s the reason the amount of their account payable is more than their account receivables. And the other major reason for this condition is their most of the assets are the fixed assets like plants and equipment and through that, they are not able to generate more profit, because their total sales are less than the number of their current expenses.
The other of this condition can be their shareholder ratio is almost equal Ferris is had some percent extra of company total share value, so one individual is not able to decide for the company betterment. According to the income statement of the company is expenses more on their depreciation rather than the investment on their promotions ad administration.
And after evaluating the companies percent of sale graph is clear that the reason for this less income is their variable costs, company is not able to control their overheads, and expenses in a proper way and that is the main reason for their this state.
So through analyses this report of the company it’s clear that their current state and financial position is not a good phase. And for improving they need to adopt much strategic activity and decision otherwise, there is no option for the company than total demonization.
Implemented strategies –
For improving the current financial state of the company they need to adopt and implement strategies for their betterment and future growth because according to the current condition company is started getting lost.
So after considering these critical conditions of the company these are some strategies that the company is going to implement, for upgrading their current state
· Firstly the company needs to estimate what products are not profitable, and what product increases their expenses. In this company, their products are cake, cedar, cid, coat, and cure. And from the sale of cake and cedar, they are facing negative net margin value, and their main source of the profit is cid. So for improving the profit, the basic strategy is they need to less the manufacturing of the cake and cedar, and they need to focus more on one manufacturing of the cid, coat, and cure.
· They need to increase their market to increase the sale and their loyal customers, and for this, they adopt a market strategy for advertisement and promotion.
· Reducing the price of inventory is also includes in the market strategy for less the amount of their expenses.
· Reduce the overhead expenses, because in the company the variable overheads are the main reason for the company expenses, so they need to adopt some strategy for control their variable expenses, so their overheads are also get controlled accordingly (Ştefănescu, 2015).
Rational following the strategic judgment –
The rational behaviors are includes in the strategic decision-making of the company so that company can achieve their best level of benefits that they can get from those activities. According to the rational behavior of the people they what they best quality and the best price of the product at the same time, so according to the company prospective they concentrate on how the company can get more profit, and sale of their product, without increasing their current investment and expenses, but this thinking of the company is the major reason, that they are facing loss in their business (Bazerman, & Moore, 2012).
These are the steps for the company to make a rational decision-making process
1. Firstly they need to identify the real problems of the company, that what is the reason why they are facing loss.
2. Then they need to make decisions accordingly, so they can save their money with increase the number of sales and profit.
3. They also need to focused on the alternatives of the decisions, and from all of the alternatives, they need to evaluate and estimate the best alternative according to their need of time (Marwala, 2015).
Outcomes from the implemented strategies –
In a company, every strategic decision is taken for achieving some outcome from that activity, and every outcome from any decision is to present the accuracy and effectiveness of the decision. These are some key concepts for the outcomes of the decision implementation is acceptability, adoption, appropriateness, feasibility, fidelity, penetration, sustainability, and implementation cost.
The outcomes from the implemented strategies could be these;
· Taking every decision after considering all the rational behavior of the company and the customers, the company can evaluate the entire alternative of all the methods and can choose the best of them.
· And after deciding the variable expenses of the company they can able to find where are they expenses much and unnecessarily. And the outcome from these decisions helpful for them to control their cost.
· And from evaluating their best sailing product company the strategic decision, and their implementation is the best way. so through these decision company is ignore to produce more cakes and cedar, and now they are focusing on the more and best production of their other products which are cid, coat, and cure. Through this way, they will able to make more sales, and achieve their targets and income expectations.
So these all are the best strategic way to increase the sale ratio of the company. And through using these strategies for decision making they can effectively evaluate the actual reason that where they are lacking, and they can make a decision according to their weakness and recourses.
Round 2 Strategy
Implementation strategy and rational
R&D
According to the first round, Chester did not perform very well in the traditional sector. Sales in this segment were low and many cake products remained in the inventory in this segment although our price was very competitive. We examined all parameters such as awareness and access, which were 82% and 66%, respectively (Figure 1). This means that consumers are well aware of the cake and also that this product was sufficiently available to them. To find the root of the problem, we looked at the age and revision date and found that our revision date was too late, November 27, 2021. This leads to low sales and products remaining in stock because consumers do not have enough time to recognize our product. Therefore, in Round 2, our team decided to focus on the revision date and reduce it to January 19, 2022 by choosing the right number for items of preference, size and MTBF.
Marketing
In the marketing section, we discussed price as an important parameter. In the first round, we sat the price at $ 25, although we had the lowest price among the competitors. On the other hand, our first priority is to sell inventory, not to make a lot of money at this stage. So, we decided to offer a competitive price of $ 24.50 to beat the competition and try to clear our inventory at this point.
Similarly, Chester decided to change the promotion budget and sales budget unchanged. We did not reduce it because these parameters are very important for customer access and awareness. On the other hand, we did not increase them because it costs a lot for our company, so we decided to keep it at the same level. For Cedar, Low-End, our company has done very well. We have not changed much and just adjust the MTBF and age function within the specified range by changing the size. The final decision will result in a revision date of 7 January 2022 that was acceptable.
For forecast, our total market size for the traditional sector was 8,067 with a growth rate of 9.2% in demand. In the first round, our market share was 14.1%, so we sat at 18% for our market share, considering the reasonable growth for it. Based on this calculation, our forecast for the cake was 1600. Similarly, for Cedar, our low-end product, we increased our market share from 17.7% to 20% because there was a gap between actual and potential market share in the first round report (Figure 2). Although we did very well in the first round in low-level markets, with this growth in market share we could increase our profitability.
Production
Our company uses 83% of its capacity in the traditional sector and covers forecasts. Also, because our capacity is able to cover next year's forecast, even taking into account the growth of market share, so we did not change the capacity and automation because it is too expensive for us and we do not need it. The same goes for other products like Cedar, Cid, Coat and Cure.
Finance
Chester sat a maximum long-term debt of $ 7,300 to avoid emergency loans which is very dangerous for companies and bankrupt them. Also, since long-term debt is a ten-year loan and Capsim is five years long, it makes sense to set it at a high level. In addition, since our closing cash position was in good shape ($ 29,141), we did not need to receive a issue stock and zeroed it.
Round 2 - Outcomes and current situation
Examining the second-round report after its release, we realized that we did a good job and our decisions led to zero inventory in the traditional and low-end markets. Our market share has increased from 15.9% to 18.3% and all ROS, ROA and ROE parameters have increased significantly. On the other hand, although our stock price has risen among the competitors before the last stage, but we have decreased and reached 14.3 from 21.79. We estimate that this is a matter of $ 0 profitability and dividends. Because our strategy in Round 2 was to increase sales and zero our inventory, we chose the lowest price for our products (Gleeson, 2019). Therefore, it is normal in this situation that our profitability and stock prices have decreased, and it was predictable. Our plan and strategy for the next round is to compensate for low profits and increase them.
Round 3
Current Financial State
In order to gauge the current financial state of the Chester, the critical documents like the Share Holder Reports, Financial Data, Estimated Budgets, Key Decisions, Vision behind the key strategies, the financial activity and trends of the last 5 years have to be studied diligently, so as to draw insights about the current financial state of the company.
The financial statements as mentioned in the Annual Report 2021-22 clearly mentions that the company is currently running in losses of ($4316). However, one point to be noted is that the amount of loss made by the company for 2021-22 is less as compared to the year 2020-21, which amounted to ($5544).
The current loss is mainly due to the early retirement of long-term debt, the amount in account receivable and the account payable. The receivables are higher as compared to payable, which is a sign of improvement, as compared to the previous year where amount in account payable was more than that of the amount in the account receivables.
Despite the fact that the company has a significant market share of 16.8% which is quite close to its peers, it has not been able to fetch any significant profit out of its sale. The variable costs and depreciation are the core reasons behind the not so profitable sale despite a good market share.
Although the current financial state is not in a good shape, things have improved than the last year, the testing times for the company aren’t over yet. It is only possible through strategic business moves and decisions that the company could come out of the loss and start making profits as expected by the shareholders.
Implemented Strategies
So as to improve the current financial state, the company needs to make strategic calls to enhance the growth prospects of the business. Here are some of the strategies that are implemented in the 2021-22:
· The budget of Recruitment and Retention of the Scientists have been increased 4 times from being $200 in 2020-21 to $800 in 2021-2022. The reason behind this strategic move is to enhance the R&D activities in the company to figure the way to ensure better profitability of the products.
· There has been financial fine tuning on the product basis. This means altering the size, unit sales, marketing price, etc.
· There’s no Bond Issue by the company this time, unlike the previous year where $7,300 was dedicated to the Bond Issue.
Rationale following the Strategic Judgement
The company is currently facing loss but is on its way to recover from the existing losses and move towards the profit making. However, the products individually are still not able to generate the profits.
The company took debt to enhance its own capabilities, but in turn happened to change the cash position of the company. Since the company has brought in certain operational overhauls, the operational costs have significantly increased, along with the debt amount which are taken to implement these overhauls in the existing operations system.
This Long-term debt has been the biggest contributor to the liabilities of the company. However, plants and equipment are the biggest assets followed by the Inventory and the Amount of Account Receivables.
Outcomes of the Implemented Strategies
The key outcomes of the implemented strategies are:
· There has been a significant rise in the company’s liabilities valuation due to long-term debts. However, the company’s stock still fell down further.
· The company lost a small part of its market share too. And the net loss too increased due to the long-term debts that were taken as a part of the strategy.
· While the demands and the units sold were tactfully balanced, still the inventory led to additional loss in addition to the net operational costs.
· However, the most disappointing fact is that the sales were still unable to make significant profit.
Reference
Capsim. (2020). Capsim Management Simulations, Inc. Retrieved from: https://www.capsim.com/about/
Gleeson, P. (2019, January 28). What Causes Stocks to Increase or Decrease?. ZACKS Our research. your Success. https://finance.zacks.com/causes-stocks-increase-decrease-5225.html
Nithin Geereddy. (2013). Strategic Analysis Of Starbucks Corporation, Global Data and MarketLine Financial Deals, Starbucks Corporation
