1. Digby realized its true production potential and planned capacity accordingly to reduce unused assets and depreciation. 2. Underestimating market demand for its products led Digby to lose potential sales and profits to competitors. 3. Analyzing product segments revealed some products had low margins, so Digby cut underperforming segments to focus on more profitable ones.

1. 1 DIGBY
8 YEARS
16 LESSONS
Team | Preeti |Swapnil | Anshika | Ajinkya

2. LEARNING CYCLE

3. Key Learning 1:
Realise your true potential
and plan your capacity
accordingly

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

5. Key Learning 2:
Your mistake = competitor’s profit

6. Problem:
O Conservative sales forecast and production
Cause:
O Underestimate our own products
Effect:
O Stock out
O Loss of potential profit

7. Produc Potential market Actual market
t
share
share
Pot-Actual MS
Total demand
Units not
produced
Price
Loss
Daze
17.90%
15.20%
2.70%
8067
217.809
28.00
6098.652
Dell
20.00%
16.30%
3.70%
10009
370.333
20.00
7406.66
Dixi
21.00%
20.00%
1.00%
2967
29.67
40.00
1186.8
Dot
22.70%
15.90%
6.80%
2294
155.992
34.00
5303.728
Dune
17.50%
17.30%
0.20%
2347
4.694
35.00
164.29
25684
778.498
20160.13

9. Key Learning 3:
Analyse the products and
cut off the tail

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

12. Key Learning 4:
Accurate sale forecasts will
lead to maximum profit

13. Problems:
O Over-stocking
Causes:
O Overestimating our products
O Underestimating our competitors
O Aggressive prediction
Effects:
O Negative cash flow from operating activities

14. Products
Daze
Dell
Dixie
Dune
Dude
Dexter
Dik
EXCESS STOCK
Inventory
1208
1025
88
13
98
146
431
3009

15. Key Learning 5:
Making profit does not mean
your business is doing well

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

18. Key Learning 6:
Give the customers what they want

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

20. Performance
What customers
want?
What we deliver?
Products
Dik
Size
12.5-13.4
7.5-6.6
14.7
5.3
units sold
13
inventory production
431
444

21. Dik (,000)
Sale
$500
Total variable
$1710
Contribution margin
($1210)
Total Period cost
$4360
Net margin
($5570)

22. Key Learning 7:
Avoid Myopic Vision

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

25. Key Learning 8:
Who’s Richer?
You or Ambani?

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.

28. Key Learning 9:
Right Decision at the Right Time

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 %

30. Round 4
Round 6

31. Key Learning 10:
“Never invest in a business you
can’t understand”
~ warren buffet

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 %

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

40. Key Learning 15:
Exploit Seller’s Market

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

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.

48. [

49. THANK YOU