MOGUL ANALYSIS
Paper details
You need according toQ7, 08, 09, 010 data to do the analysis- And then if you finish the analysis, you need do the
summary of the all quarter-
Each team will submit a group paper analyzing their company’s performance over the life of the simulation exercise- The
paper will be judged on the basis of: (a) the content and support for the analysis you present, (b) the completeness of
your analysis, (c) the accuracy of your assessment, and (d) the presentation [i-e-; grammar, organization, etc-] of what
you submit- Analysis versus description of your performance is paramount- This paper should not be viewed as a report
to shareholders, but rather as an analytical critique of your performance- The paper should include: 1- Your
performance as a management team (e-g-, how well you worked together, responded to problems, balanced strengths
and weaknesses, etc-)- 2- An overview of how your company made weekly adjustments 3- The final overall condition of
your company. a- Competitive position- b- Marketing strategy. c- Production/operations performance- (1. Cost control- e-
Financial condition- f- Strengths and weaknesses of your firm- g- Impact of your decisions on people- Consider all people
affected by your decisions- h- Ability to take advantage of future operations-
Week 1 Analysis
As a team, we struggled to achieve a favorable market position in week 1 of the simulation. Therefore, after the first three quarters we continued to remain in last place. One way we can assess our poor rank is through the industry reports. For example, the Selling & Administrative Expense Report indicated that we declined by $34,000 from quarter 0 to quarter 1. We believe that this was the result of insufficient advertising of our products. In quarter 1, we advertised product 1 more than product 2 which resulted in the greater demand of product 1. However, we only sold a combined 251 products of a forecasted 11,100. Therefore, we increased advertising in Quarter 2, but then decreased it again by Quarter 3. After looking back on these decisions, we learned that, as a team, we were too pre-occupied with seeing an immediate response. Therefore, we abandoned our strategy if we did not see instant improvement. If we had worked harder to enforce one particular strategy over time, we could have seen gradual improvement as we navigated market changes. Furthermore, we were too preoccupied with decreasing all of our expenses that we failed to realize that the S&A expense was a healthy expense for us to incur in order for our products to do well.
Additionally, we hired employees unnecessarily in Quarter 1, which resulted in us constantly having to either lay-off or fire employees throughout the week. Thus, we believe that such unnecessary costs combined, with a surplus of raw materials, are partly what drove-up the per-unit cost of our products by Quarter 3. We also believe that our success this week was hindered by our ad message. In Quarters 1 and 2, we were mainly advertising our products for their quality. However, we averaged a quality of $6.75 per unit in Quarter 1 and in Quarter 2, we only averaged a quality of $6 per unit. This decline was the effect of us drastically changing both price and quantity from quarter to quarter without realizing the effects it had. We were too focused on seeing positive numbers, rather than an improvement, at the end of the quarter.
Thus, we were confusing the market by failing to remain true to an ad message and fluctuating our variable costs by too much, too often.
As a team, we were successful in coming to a consensus on how to procced and improve our demand from quarter to quarter. By Quarter 3, we had reached a combined demand of 15,430 units. However, we failed to factor in such an increase in sales and therefore under-forecasted demand by more than 2,000 units, thus resulting in a stock out. Going into week 2, we are worried that Quarter 3’s stock-out will make it hard to regain the trust of the market – even if we can prevent such an occurrence form happening again.
One thing that we realized during a group discussion was that in Week 1, we failed to think of the simulation as a real-life scenario. For example, if we were Nike and were constantly changing our advertisement message, price, and quality, no one would understand our product, thus resulting in poor performance. Thus, we failed to consider the following: How is the market supposed to understand our product and marketing approach if we do not?
Therefore, our low industry rank after week 1 was the result of poor strategic planning and rash decisions. As a group we were so concerned to see success that we were only going to be happy with a quarter report that showed us moving up the rank. However, we failed to consider that going slow and steady often wins the race. One thing our team has working for us is that we are dedicated to putting in the required effort and figuring out how to succeed as a whole by listening to each other’s opinions and learning from our mistakes. Through this, we have learned that we need to pick a consistent strategy, price-structure, and message.
Therefore, going into Week 2, we have decided to utilize the strategy of our most successful product thus far. That product was our Quarter 3, Product 2. The item was moderately priced and had a relatively low quality associated with it. Through price-based advertising, we were able to sell more than 13,000 units in just one quarter. For us, trying to implement two strategies at once was too confusing to maintain as well as too confusing for the market to understand. We believe that using the above strategy for both of our products in future quarters will allow us to identify our niche since we were previously too diversified.
Week 2 Analysis
As stated above, as a team, we have struggled with Mogul. In the simulation, there are two sets of rules that are needed for success. The first is Mogul’s rules. Such rules include worker productivity, how much it costs to lay-off a worker, as well as determining what quarter raw materials will arrive in once ordered. These “rules” governed our actions. Additionally, we needed to learn the rules of running a business. Such rules include what customers would do when demand was there, but inventory was not, as well as how much it would impact the company to keep raw materials in inventory, but not use them for production. Therefore, as the group in last place, negative reinforcement made us learn these rules quickly. From the beginning, we thought that, as business owners, we needed to produce and order raw materials. Those actions left us with high carrying costs and unnecessary labor charges.
Upon entering our numbers for Quarter 3, we had several epiphanies about managing our company. For Quarters 4, 5, and 6, we looked at the number of products we ordered in the previous quarter to estimate our future demand. For example, we had experienced a stock-out of product 1 in quarter three. Therefore, as stated in Week 1’s analysis, we feared that consumer demand would decrease in the next quarter because of that. We hoped to offset our forecasted decrease in demand by increasing advertisement for that product. This strategy worked well, so we began to slowly add to our marketing budget as long as our demand lagged. Thus, it appeared to be an effective strategy, at least for now.
In addition, we were paying high carrying costs for production, workers, and raw materials. Based on the above categories, Quarter 4 had the highest carrying costs. We realized that we needed to lower both our raw materials inventory and how many finished goods we had injunction with demand. Therefore, we looked at what we would need to produce in the event of higher demand and then used that as the basis for what we actually needed to produce. We ceased to order raw materials or minimally ordered – based on demand. Although we are missing out on economies of scale it looks like our business will never get to that level of production. We ordered so much raw material in Quarter 1 that we have yet to need to order more.
Similar to in the real world, we realized that we had to manage our shortcomings from the human resources perspective. Thus, we have had to lay off workers, as well as sell-off part of the factory. This helped to keep the factory both lean and as efficient as possible. Overall, we realized it would cost more to have workers produce because we would have to order more raw materials and sit on finished products that had high carrying costs.
For Quarters 4, 5, and 6, as a team, we noticed a slight trend. That trend was that we were decreasing the amount of money that we owed. Our total equity and liability was increasing slowly, and our net cash flow, though still in the negative, was improving. We went from -$1,790,669 in Quarter 3, to -$1,709,635 in Quarter 6. Thus, our increased awareness of how a business runs in the real world was proving to benefit our mogul company.
Looking towards Quarter 7, we foresee, as a team, having to increase advertisement in order to increase our demand. Therefore, looking into Week 3, based on how slow our growth has been thus far, we may need to sell off some more of our factory, as well as lay-off/fire some more employees. It makes no sense to carry the cost of employees they don’t add value to operations. We understand why companies use lay-offs over firing especially if they need skilled
labor. For us, the fact that we will probably produce such low quantities means that we are allowing the factory to be inefficient.
Additionally, looking towards Quarter 7, we still have a lot of raw material in inventory. Our ending inventory for product 1 was 1,188 units and its demand in Quarter 6 was 5,071 units, therefore we should produce more of this product going into Week 3. For product 2, its demand was 1,122 units and its inventory was 3,944 units, therefore going into Week 3, we really don’t need to produce more of this product. Thus, our data further justifies us laying-off or firing some additional employees. Also, we can hope for marginally higher demand since we plan to increase advertisement. As a team, in Week 3, we will be paying attention to our COGS as well as the balance sheet to aid us in our decisions.
Week 3 Analysis
