2. Global Challenge
Letter To Shareholders
To the Shareholders of Orange Inc.:
We would like to take a moment to appreciate your trust and investment into Orange Inc.
and are extremely delighted to announce Orange’s gain in net worth at the end of this
Financial year was $20.7 Billion and the cumulative total shareholder return was
32.05%, which was the best offered in this industry by any company. Since our inception 7
years ago, per-share value has grown from $119 to $746.
Our company is built upon three strong value pillars: Innovation, EmployeeFocus and
Sustainable development. We have worked, with your support, on these principles and
achieved phenomenal profits, which were distributed equally with all the shareholders,
time to time.
Investing in R&D and constant innovation each operating year has been our constant
strategy. With each financial year, we invested and developed new products with new
features, keeping leading position in markets. We aim to continue this strategy and be the
most innovative company in the industry.
Our employees are our backbone and they are the best in their fields. We provide them
adequate training and best salary in the market so as to retain the best talent, and our
turnover is at the lowest percent of 1%.
Paying special attention to sustainable development, we carefully choose the best suppliers
every year based on their Ethical and Sustainable ranking.
We at Orange Inc. are grateful to our customers for their trust, to each other for our hard
work and to our shareholders for their support and encouragement.
Regards
Co Founders
Pratik Renuse | Rozanna Tasalova | Chao Zhang
3. Company Review
Orange Inc. is a leading company in the mobile phone industry based in the USA. It operates
in three major markets: USA, Asia and Europe with production plants in USA and Asia (12
plants in USA and 8 plants in Asia).
Orange Inc. started with a single product 7 years back and then gradually diversified into 4
products in 3 regions worldwide, and generated profits successfully because of top talent,
geographical diversification of products, continuous innovation, aggressive promotion,
sustainable suppliers and maintaining correct financial decisions.
At the end of a 7 year period, Orange Inc’s financial standings are as follows:
The debt to equity ratio is maintained at 0.14 and the enterprise is valued at 20 797 932 K
USD. This enables company to further invest and diversify into new technologies like Tech-
5 and Tech-6 or enter new markets such as Africa, South America.
The company has the lowest possible personnelle turnover of 1% and has the most
attractive working conditions in the market. This has lead the company to achieve constant
HR Efficiency ratio scale of 1.09.
Without being affected by the market conditions, Orange Inc. has always paid attention to
sustainable development, hence has achieved the best Social Responsibility ranking in the
Industry.
4. Management Decisions and Analysis
Year 1:
The Mission and Objectives of Orange Inc. were framed and the Three Value Pillars
were decided upon.
We invested in Three New Plants in Asia straightaway, so that we could get the
benefit of production from those plants as early as possible.
We decided the location and distribution of products based on the market analysis.
We created a long term plan of placing product Tech -3 in Asia, Tech-4 in Europe
and Tech-2 in USA, based on the given Market Trends(Network Coverage Graph).
We decided to outsource Tech-2 in Asia for Asian and European market, rather than
producing it in USA and then exporting it. This also enabled us to deploy employees
in R&D for development of new product Tech -3.
We hired 100 more personnels to increase the capacity of R&D department.
We offered Tech -2 in Asia with only 1 feature, so that it’s price could be reduced as
the Asian market is extremely price sensitive.
We finished this year at the first position in Industry (Cumulative total shareholder
return)
Year 2:
We continued our investments in production plants in Asia (+4 plants), what would
enable our capacity in this region in further years.
5. We hired 100 more people for our R&D Department and with the new team of 400
people we worked for the rest of the remaining financial years. We increased salary
for $100 and training budget for $100, what made us the “Best place to work” in the
second and all the other years.
Following our strategy of innovations, we invested full capacity of R&D team in
development of Tech -3 and additional feature of Tech -1 and Tech -2.
As our Asian plants did not start their work in the Year 2, we kept our outsourcing
strategy for Tech -2 at European and Asian markets.
After analysis of bank interests for cash, we took a decision to transfer cash to Asia
from Europe.
We finished this year also at the first position in Industry (Cumulative total
shareholder return)
Year 3:
Our three new plants started functioning and producing in Asia. This reduced
logistic cost per sold product in Asia dramatically (from $21.2 to $5.9 per product)
We decide that due to increase in the Asian market size over the years and increase
of logistic costs between the USA and China, we need one more plant in Asia.
Without hiring anyone, we increased efficiency of the existing team. To motivate
R&D department, we increased salary.
At the third year, we paid the first dividends to our shareholders ($300 000 K ,
4.43% of dividend yield)
Following our strategy of innovations, we invested full capacity of R&D team in
development of Tech -3 and finished its development in this year. We also bought
additional features for Tech -1 and Tech -2 to satisfy demand of US and European
customers.
6. We finished this year also at the first position in Industry (Cumulative total
shareholder return)
Year 4:
We got a total of 7 plants in Asia.
We paid most of the long term debt, so that our losses due to debt interest decrease.
We increased the salary and the training budget, so as to reduce the turnover, which
resulted in the lowest turnover(1%).
Tech 3 was ready in this year and to leverage the initial product interest and hype
advantage, we introduced Tech 3 in Asia and Tech 4 in Europe ( by buying Tech -4
licence).
It was the year of war, thus due to dramatic change in market conditions, we
lowered the demand estimates and prepared for inventory pile up.
We finished this year also at the first position in Industry (Cumulative total
shareholder return).
Year 5:
We increased the salary by $50 so as to make the employees profitable along with
the company.
We had all our plants in Asia and USA, up and running ( a total of 8+ 12 plants).
We paid heavy dividends to shareholders ($ 700 000 K),as we believe in sharing our
profits with all our shareholders.
7. To make sure that our shareholders have the best profits, we decided that we would
not issue new shares in order to increase price per share.
Regarding Logistics, we decided that Tech 4 produced in Asia, would be sold only in
the European Market; Tech 3 only at Asian market; Tech 2 produced in US plants
would be sold in USA.
We decided to use the best 3 suppliers because of change in market conditions.
We finished this year also at the first position in Industry (Cumulative total
shareholder return).
Year 6:
We paid dividends so as to share the profits.
Due to too much cash in hand, we decided to transfer most of the cash to Asia, so
that we could leverage the interest rates.
We decided to heavily invest in upgrading features for all products in all markets,
especially European market products (Tech -4) and due to large cash reserve.
We increased salary and training budget in line with our growing profits.
We finished this year also at the first position in Industry (Cumulative total
shareholder return).
Year 7:
Following the market trends and competitor analysis, we decided to drop off Tech -1
from the US market due to decreasing sales and market size of the product, and we
introduced instead a better and innovative product ( tech -4) in US.
8. Following the same strategy, we exchanged Tech - 1 with Tech - 2, in the European
market so that we could leverage the opportunity.
We paid heavy dividends to fix our leading position.
Last year of the analysed period we took again the first position in industry with
Cumulative total shareholder return %
External Market Analysis: At the seventh year of operations, industry is represented in
three markets (Asia, US, Europe). Orange Inc. is active in all three markets and has an
ambition to enter South America and Africa.
Product Portfolio: Tech - 1 ( 10 features), Tech -2 (10 features), Tech -3 (5 features), Tech 4
(10 features). Overall, Orange Inc. has the best and widest range of products.
Foreign Operations: Orange Inc. has 8 plants in Asian Market and operates in Asia and
Europe through local production and/or export. We plan to diversify into Africa and South
America.
Competitor Analysis:
Market is shared between 6 companies, producing 4 different products. All the competitors
are based in the USA with operations in US, Asian and European markets.
At the moment, global market is shared in next proportions: 21.6% The Brohood, 18.65%
The Rangers, 17.02% Orange Inc., 15.25% Hi-Tech, 13.25% 3XSM and 14.24% FMPX. Thus,
the main competitors of Orange Inc. are the Brohood and the Rangers.
9. Threat of The brohood is based on their high capacity of production in Asia and
commitment not to outsource.
Threat of The rangers is based on the fact that they are unpredictable and their aggressive
pricing.
Learning Outcome and Final Remarks:
This Business Simulation provided an apt platform for implementing all the knowledge we
gained during our MIB course, and we successfully implemented concepts such as
innovation strategies, pricing strategy, product differentiation and innovation, CSR
practices.
We learnt and strengthened our financial concepts, especially related to company
valuation, dividends and share price index.
