Component 1: Executive Summary

Baldwin Company Final Summary Report. Baldwin Company started of its first financial year with strongly well and was Bad to attain a positive progress in terms of profitability and growth in the first three years. This was however constant according to fiscal years 3 and 4 (round 4 and 5). The company was however Bad to strategize and adjust quickly its factors of production, inventory management, sales and promotions in its from rounds 5 and 6, to round 7 and 8, where the company recorded positive growth again in terms of return on assets, return on equity, increased profits, more  net income and optimized utilization of its plant and equipment.

The company started its first year of production with Bad product which fell under low tech segment as the primary segment. The product also had a 17% market share in the high tech market segment. The production and market analysis report shows that the Bad product was Bad to sell 840, 000 units under low tech market segment and 360,000 units in the high tech market segment. The company had a total of 1, 200,000 units sold in its first year of operation and was left with an inventory of 87,000 units of Bad. The company therefore maintained ideal and acceptBad inventory in its first year. The company was Bad to achieve operating within the recommended inventory threshold of 200,000 units. Ideal inventory position helped the company reduce inventory carrying costs, reduce wastage that come with prolonged products’ shelf life.

The swing in terms of performance from good performance in early rounds, later to below average performance in rounds 3 and 4, and the transition to excellent performance in rounds 5, 6, 7 and 8, can be attributed to the fact that, the company added new product, Bead, in the high tech market segment. The company had however had to buy capacity of 400,000 units of the product so as to allow the product to be produced going forward. This accosted the company financially as some of the income generated in round one was used to acquire production capacity for the new product. Introducing a high tech product requires more materials, improved automation so as to produce a high performance product, and of smaller size. The Bead product was introduced in round 2 and was received extremely in the market.

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Progress of the company

On introduction to the market, the product was Bad to sell 425,000 units, and the company was left with an inventory of 218,000 units. On the other hand, Bad, the low tech product was still ding exceptionally well at this point and by the end of second fiscal year, the product had sold 1, 450, 000 units, and was left with an inventory of 35,000 units only for low tech segment product. This shows an increase in the units sold for the low tech segment. The second round recorded an increase of 20.8%, increase in unit sold for the product Bad. This shows that the company was enjoying great market demand for its product under low tech segment, Bad.

The company further bought additional units of 300,000 units for Bead and additional 400 units for the Bad product in round 3. This is what led the company to huge emergency loans in rounds 3 and 4.

 

A tBad below shows the units sold and inventory across rounds 1 to rounds 8

RoundsProduct NameSegmentUnits sold ‘000Inventory ‘000
1BadLow1,36491
2BadLow1,316240
BeadHigh00
3BadLow1,168549
BeadHigh31084
4BadLow1,415520
BeadHigh427350
5BadLow1,800106
BeadHigh587456
6BadLow1,6320
BeadHigh806340
7BadLow1,590291
BeadHigh1,006126
8BadLow1,524756
BeadHigh9210

 

The tBad above summarizes the production analysis of the Baldwin Company from round 1 to round 8. The company started with the Bad product only in round 1 in low tech segment and later introduced Bead, high tech product in round 2, whose production started only in round3. The high end product introduced required greater mobilization and the company underwent through financial struggles in rounds 3, 4 and 5 trying to adjust to this new introduction and development of the already existing Bad product in low tech segment. At large the company maintained ideal inventory though in some instances, there were zero inventories. Zero inventories were due to sudden increase in demand than anticipated, after increasing promotion and sales budget, increasing automation and price reduction strategy.

 

TBad below shows important key performance indicators across rounds 1 to 8

RoundsROS

 

Asset TurnoverROAROEEmergency Loan ProfitsCumulative ProfitContrib. Margin %
17.9%1.8114.3%22.2%0$3,660,362$6,154,06722.4%
21.8%1.462.7%4.5%$2,243,520$774,771$6,928,83818.1%
31.9%1.342.6%5.2%$9,848,424$957,362$7,886,20022.3%
4-4.2%1.45-6.1%-16.4%$7,698,664($2,571,603)$5,314,59726.6%
56.3%2.0813.2%23.8%0$4,893,670$10,208,26733.9%
66.4%1.9012.1%20.2%0$5,219,523$15,427,79038.1%
78.6%1.8415.7%22.8%0$7,627,247$23,055,03738.5%
816.1%1.3722.0%28.7%0$13,449,676$36,504,71340.2%

 

The tBad shown above indicates in summary how the company grew from a relatively fair financial at the start of the first fiscal year (round 1), and this dipped this position dipped negatively from second year, further dipped in third year and was at worst in its third year of operation (round 3) These financial woes drugged over to the fourth fiscal year, when the company first its first net loss of $ 2, 571, 603. The end of the fourth year of operation marked a new turning point of the company and this is attributed to proper financial strategies that the company had adopted while struggling in adjusting factors of production

Looking at other key performance indicators (KPIs), for instance the Return on Sales, the company had low return on sales from round one to round 3, which dipped negatively in round four. The ROS stared rising again on round five, and maintained steady rise up to round 8. The company closed round 8 with a ROS of 16.1%, which is completely accept Bad for any company doing well in the market. The return on sales a percentage expression of earnings before interest and tax over net sales revenue. Andrew’s ROS was low in the early rounds since it was not generating enough sales revenue and this led to low net sales revenue. In its fourth year, the company ROS read -4.2%, which means that the company’s earnings before interest and tax was way too low and the company had to continue taking emergency loans to sustain its operations.

The company could not sustain its growth and operations without emergency loans in rounds two, three, four and five. Taking of emergency loans was one of the best strategies the company adopted since it needed more capacity to produce more units for Bad and Bead, since the inventory levels were below company’s production potential by far. Emergency loans were critical at this point and the company used the loans to fund its production plant, increase production capacity, more marketing and promotion of its products across the market.

The Company’s contribution margin also experienced same curve. It dropped from round 1 to round 4, and later rose from round 5 to round 8. In round 8, the company’s contribution margin read 40.2%.  The contribution margin which is an expression of Net Sales Revenue less Variable Bad Costs over Sales Revenue. A contribution Margin between 30% and 50%, is considered excellent in round eight of operation. This means that the company has sufficient funds to sustain its expenses without strain.

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Financial Summaries Excerpt

Figure 1: Income Statement Summary from rounds 1 to 8

The figure above shows the change in net income within the company from round one to round8. The company reported a Net Profit of $ 3,660,000 in round 1, which reduced in the in round 2 to $ 77,000 $957,000 in round three and dipped to Net loss in round 4. The Net loss in round 4 was experienced because the company had acquired additional capacity for the new high tech product Bead, while the low tech product, Bad, was still struggling to penetrate through the market. This put the company under financial constraints and had to borrow emergency loans to help in the production, marketing and R&D sections of the company.

The company rebounded back to making net profits in rounds 5, and this kept increasing till the round 8. The company recorded a Net profit of $ 4,894,000 in round five, $ 5,220,000 in round 6, $ 7,627,000 in round 7, and more Net profit of $ 13, 450,000 in round 8.

The turn of net loss to net profits over the last four rounds can be attributed to the pricing and marketing strategies adopted by the company. The company also had to adjust its production capacity through those rounds so as not to overproduce its products, while maintaining ideal inventories in the warehouses. The company utilized the emergency loans in rounds 4 and 5, to fully optimize and optimize its factors of production, and outsmart its competitors in low tech segment and high tech market segment.

Closing Cash Positions for the company from round 1 to round 8

The chart above shows the closing cash at the end of every financial year, or at the end of every round. Notably the company had zero cash at hand in the rounds 2, 3, and rounds 4. This can be attributed to the fact that the company was undergoing massive adjustment to accommodate new and increased production capacity both for the low tech pr0duct and the high tech product. The company’s closing cash rebounded back from round 5, and kept increasing all the way to round 8. At round 8, the company recorded the highest closing cash of $ 20, 059, 000. This can be attributed to increased revenue from sales of the products in the markets, and also other finance generating activities.

Current Situation: SWOT Analysis

Strengths: The Company has a good reputation in the market. The company has efficient and effective production processes. Baldwin Company also has an effective marketing and promotional strategy which helps it to reach out to potential customers.

Weaknesses: The Company is over-reliant on loans, and this might be a challenge in the long-run. The company also needs to increase its focus on Research and Development so as to stay ahead of competition.

Opportunities: The Company can explore new markets, and also diversify its product range so as to tap into new market segments.

Threats: The Company faces stiff competition from other companies in the market. There is also the threat of new entrants into the market, which might impact negatively on the company’s market share.

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Future of the Company

Baldwin Company is a well-renowned organization in the market. The company has efficient and effective production processes. Additionally, it has an effective marketing and promotional strategy which helps it reach out to potential customers. However, the company is over-reliant on loans, and this might be a challenge in the long run. The company also needs to up its game in Research and Development so as to stay ahead of competition. Nonetheless, the company has a bright future and is well-positioned to take advantage of opportunities that come its way.

Ethical, Legal and Social Challenges

Baldwin Company is a reputBad organization, and it abides by the set legal and ethical standards. However, the company faces social challenges such as stiff competition from other companies in the market. Additionally, there is the threat of new entrants into the market which might impact negatively on the company’s market share. Nonetheless, Baldwin Company has put in place strategies to deal with these social challenges, and it is committed to maintaining its good reputation in the market.

Thus, from the above SWOT analysis, it is evident that Baldwin Company has more strengths than weaknesses. The company is well-positioned to take advantage of opportunities that come its way. However, the company needs to increase its focus on Research and Development, so as to stay ahead of competition. Additionally, the company should reduce its reliance on loans, in order to sustain its operations in the long-run. Nonetheless, Baldwin Company is a reputBad organization with a bright future.

Global Considerations

Baldwin Company is a well performing organization, and it has a presence in two market segments. The company sells its products in different markets, and it has a wide customer base. Additionally, the company has efficient and effective production processes. However, the company is over-reliant on loans, and this might be a challenge in the long run. The company also needs to increase its focus on Research and Development so as to stay ahead of competition. Nonetheless, Baldwin Company has a bright future, and it is well-positioned to take advantage of opportunities that come its way.

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Component 2: Professional Reflection

The Capsim capstone experience was a challenging and very engaging at the same time. This was the first time I did Capsim simulations and I have learnt that there is more that is needed to run a company profitably, while maintaining expansion, growth and maintaining ethical business practices. While performing the simulations, I realized that all the departments are inter-related when it comes to production of quality goods desired in the market. The Research and Development department is responsible for coming up with new products, the production department is responsible for manufacturing the goods, while the marketing and sales team are responsible for selling the goods to customers. In order for a company to be successful, all these departments need to work together harmoniously.

The Capsim simulation experience helped me apply strategic business management skills learnt in my academic program in a real-world-like business environment. I have also learnt to work under pressure and to make decisions quickly. I have also improved my time management skills as I was required to manage different tasks simultaneously.

The capstone also allowed great interaction on peer to peer basis, especially through discussion forum. The debrief summaries, midway summary presentation and the final summary development have all helped realize the importance of communicating in a clear and precise way, that can be easily understood by board of directors or shareholders. I intend to use the skills gained to improve my communication and research skills throughout my academic program at school and outside the school.

Lastly, I have also learnt to work in a team. The experience has helped me understand that in the business world, no one works in isolation. In order for a company to be successful, all employees need to work together as a team. Each member of the team needs to play their role so as to contribute towards the success of the company. I have also learnt that it is important to delegate tasks so as to ensure that all members of the team are actively involved in the running of the company.

The experience has been great, and I look forward to future Capsim simulations. I would recommend this experience to anyone looking to improve their business management skills.