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BUS 303 Business Project

Individual Reflection Report

As I started my first tutorial class I quickly found out that I need to make an account for mikebikes. The purpose of our study was to run our own company through Smartsims. The simulation gives us basic concept of a real life business competing with a computer generated company called ‘Mountain Top Cycles’. The ultimate goal of the simulation was to increase the shareholders value by making decisions on the price, product development marketing, operations and financial operations.

As the game starts both the companies have equal shareholder value. As instructed in the videos and help panel, I adjusted the retail price and the forecast sales unit. And then I rolled over to the next year. Little less to my knowledge my shareholder value decreased and was less than the value of Mountain Top Cycles. I rolled back then again adjusted my numbers. One of the main factors affecting the SHV was the advertisement and public relations. As I did not adjust the budget of public awareness my shareholder value decreased every time I rolled over. I rolled over and rolled back quite a few times adjusting the production and pricing.

Phase one, there are three main key approaches we could base our production decisions. We could take higher price lower production approach, medium price medium production or lower price and higher production approach. The budget for the advertising and public relations needed to be adjusted according the approach. The more investment in the advertising the more sales I could make but if the budget goes higher then it meant less profit for the company. 

Finally, after quite a few struggles I decided to go for the medium price and medium production approach. I increased my retail price to $775 and forecast unit sales to 20,000 units. I also increased my advertising and public relations expenditure to $775,000 and $675,000 respectively.

This time my SHV increased to $13.92. However, it was still lower than my competitor’s which was $14.70. It was also important to check stock from previous year while planning the production quantity. I had a stock remaining which I deducted from the production quantity.

Key Financial Results

RANJIT, Rahul Inc

Mountain Top Cycles

Shareholder Value (SHV)

$13.92

$14.70

Retail Sales

$12,750,300

$13,940,300

Profit After Tax

$1,620,442

$1,823,366

With the current decision the forecast for the net income was $1,769,996 which was higher than this year's actual result.

Firm Sales Market Share Retail Price

Ranjit, Rahul Inc 16,452 46.1% $775

Mountain Top Cycles 19,228 53.9% $725

From the above information it was clear that my company’s market share had been decreased from 50% to 46.1%.

Now I was at phase two. Not only had I had to maintain the production and public awareness but also distribution and branding of the products. The company’s brand awareness level would affect the awareness of the any new product that I would launch. Therefore, I needed to set a goal on my products. I could either focus on the mountain bike segment or the road/youth bike segment. There was a direct relationship between branding and pricing strategy. I needed to make a decision according to my pricing strategy.

There were three decisions I could make with a focus on the price.

  • High Price and Lower Volume (higher awareness)
  • Medium Price and Medium Volume (medium awareness)
  • Low Price and Higher Volume (lower awareness)

Further with the reading the help panel I initiated that we could maintain low brand awareness for approximately $200,000 - $400,000, medium awareness for $400,000 - $700,000 and a high awareness for $700,000 - $1.2 million.

Through accessing the distribution summary report I found out the proportion of distribution control of each bike model.

Bikes Bike Shops Sports Stores Discount Stores

Road 90% 10% 0%

Mountain 20% 60% 20%

Youth 10% 10% 80%

Since, we are only focusing on the ‘Mountain’ bikes for now; I made all my decision accordingly.

Channel

Stores

Max Stores

Factor

Current

Bike Shops

47

160

Support

40,000

Margin%

25

Sports Stores

164

320

Support

120,000

Margin%

25

Discount Stores

122

400

Support

40,000

Margin%

25

I changed my branding expenditure to $100,000 which was less than the previous period i.e. 200,000.

BUS 303 Business Project Image 1

I rolled over to the next financial year. This time my shareholder value increased to $18.36 which was higher than the Mountain Top Cycles value of $17.90.

Key Financial Results

RANJIT, Rahul Inc Mountain Top Cycles

Shareholder Value (SHV) $18.36 $17.90

Retail Sales $11,798,600 $15,840,720

Profit After Tax $2,230,285 $2,058,599

BUS 303 Business Project

BUS 303 Business Project Individual Reflection Report

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