4. Problem:
O Suboptimal Utilization
Causes:
O Huge unused asset
O Capacity exceed industry demand
Effects:
O Higher depreciation
O Low plant utilisation
Digby
Plant utilisation
Depreciation
Ferris
70%
154.6%
9.7 Mil
5.6 Mil
10. Problems:
O Products have low contribution margin
Causes:
O High variable cost
Effects:
O Low margin
11. O Performance segment – least profitable segment
O Net margin of Dot = (0.6) mil
O Baldwin realized this from round 1 and retired from this
segment to focus on other segments which are more
profitable
16. Problems:
O Positive profits but Negative cash flow from operating
activities
Causes:
O Excess inventory due to poor sale forecasts
Effects:
O Your business is not making money
19. Problems:
O Dik did not sell in high segment
Causes:
O Over-engineering of product for high segment
Effects:
O Huge inventory
O Negative contribution margin
O Negative cash from operation
23. Problem:
O Insufficient Automation as compared to competitors
Cause:
O Estimated cost of automation to be too high vs reduction in labor
costs
Effects:
O Higher labor costs and thus high variable costs in following
rounds
26. Problem :
O Paid off long term debt of $ 25 millions in Round 6
Causes:
O Conditioned to pay off long term debt as soon as possible
Effects:
O Emergency Loan of $ 22 millions
O Landed into trouble
Erie
Ferris
Total liabilities
4.8
19
Profit
24
31.5
27. ODon’t let Finance drive
your Business. Let your
Business drive your
Finance.
29. O Ideal Age for Low Segment: 7 yrs
O Competitors did not reengineer low segment
products
O We re-engineered Dell in Round 3 to match
Round 6 specs
O Highest Market Share in Round 6: 31 %
32. Learning
• Never read the guide = lack of preparations lead to lack
of understanding of the game
• No rehearsal = one step behind competitors
• Man of principle = no cheating
• In reality, the more information you have, the more
cutting edge you have in the industry
O “Learn from other people’s mistakes”
33. 11.
Playing the blame game when things go wrong
O Everybody wants to be included for success
O But
O Nobody wants to be responsible for the failures
O FROM
WE TO YOU
34. 12.
In war everyone loses except…
O There is enough pie for everyone
O Going for a price war
O You earn lesser so ----- you lost
O competitors’ profit go down ----- they lost
O So who win?
OConsumers
35. 13.
Blinded by greed
O Problem:
O Pricing 4.50 $ above the normal price range on D Day.
O
O
O
O
Causes:
Wrong approximation of a Seller’s market
Greed to maximize profit in Low Segment on D Day.
Impatience to exploit Low Segment
O Effects:
O Very Low Sales (857 units)
O Market Share of 7 %
36.
37.
38. 14.
Are you working for Digby or the
Marketing Company ?
Problems:
High expenditure on sales and promotion wrt profit
Causes:
Lack of business understanding
Effects:
Wastage of resources in one segment , i.e. an Unprofitable
Product
41. O In Performance Segment, we priced Dot higher than the
range by 4.49
O Made huge profits due to seller’s market
O We overestimated our competitors but they did not take
advantage of seller’s market
42.
43.
44. 16. Key Learning
O When your competitors team up
against you, remember they are
scared of you and your product.
45. O Problem:
Ferris & Erie go for a Cartel
O Causes:
Very good specs of our product
Poor age of their products
O Effects:
No major impact on us, but they won’t trust each other ever.
“Never invest in a business you can’t understand.” This Warren Buffet quote is probably an offshoot of rule No.1. He will only play a game that he is really great at to ensure that his chances of losing are slim. Understanding a business really well can help you smell trouble from miles away. Also, you can never have conviction in something you do not understand, and conviction is what enables you to pounce on a company when the time is right.