Business game. There are 8 periods in the business game simulation in total. The decisions would be made for Firm C to increase its stock price. In the whole span of time, Firm C experience three phases, namely, Development (period 0 to period 3); Recessi

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Middlesex University

MGT3194

MGT3194 Business Game

Module Leader: Hong Woo

Student name: Zhou Ye

Student Number: M00334023

Deadline for Submission: 22/07/2011

Content

  1. Introduction ……………………….…………………...3
  2. The Initial Business Strategy……………………….….3
  1. Financial performance ………………………..…………...3
  2. Market position…………………………...………………..4
  3. Initial business strategy…………………………………….6
  1. Strategies, Tactics and Plan……………………………6
  1. Period 1 --- Period 3 “Development”…………………..…………….6
  2. Period 4--- Period 6 “Recession”……………………..……………...7
  3. Period 7 --- Period 8 “Resurgence”………………….………………9
  1. Discussion on the Eventual Outcome…………………10
  2. Conclusion ……………………………………………..10

Reference

Appendix

1. Introduction

There are 8 periods in the business game simulation in total. The decisions would be made for Firm C to increase its stock price. In the whole span of time, Firm C experience three phases, namely, Development (period 0 to period 3); Recession (period 4to period 6); and Resurgence (period 7 to period 8). This report would mainly talk about the situation from the initial business strategy, applied strategies, tactics and plans, and the eventual outcome.

2. The Initial Business Strategy

The identification of initial business strategy is based on the data analysis in period 0. Financial performance and marketing positions analysis would be used to know Firm’s strengths;  weakness; opportunity and threat (SWOT).

2.1 Financial performance

The financial performance of Firm C in initial period would be considered from its liquidity ratio, debt and profitability objective’ (Davies and Boczko, Pp166).

Liquidity ratio

Liquidity ratio reflects ‘the health or otherwise of cash position of the business and its ability to meet its short-term obligation’.  

  1.  .

Therefore, the current ratio of Firm C in period 0 is,

The current ratio is an overall measure of the liquidity of the business (Davies and Boczko, Pp166). Firm C’s current ratio is 0.42, which is much less than the general acceptable ratio 2 to 1 (zeromillion.com, n.d). In other words, Firm C has great risks in the short-term debt services.  The main reasons for that are the long operation turnover, less receivable accounts and long inventory turnover.

  1. Debt ratio

Therefore, the debt ratio of Firm C in period 0 is.

The debt ratio is bigger; the risk faced by company is greater; and the capability of making profit is stronger. If the company do not have enough capital and just depend on debt, it has high risk in debt service. The debt ratio of Firm C is 82% which means Firm C has $0.82 in debt for every dollar of assets and is in a good financial health.

Profitability

The profitability ‘give an indication of how successful the business has been in its achievement of the wealth maximisation objective’ (Davies.T and Boczko.T, Pp155) .

Therefore, Firm C’s net income rate is,

Therefore, Firm C’s margin rate is,

The net profit rate and margin rate are 16.1% and 34.2% respectively. In other words, every dollar invested by Firm C would have $0.161 net profit and $ 0.34.2 gross profit. Therefore, contribution of each dollar is not effective enough.

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  1. Market position

As for the market position, Firm C’s market value is 11.4% which is much less than that of Firm A (27.9%), Firm D (28%) and firm E (23%), but its Minivan Car (Camini) occupies the whole market. Another two cars (luxury Climax and family Cafav) are not very outstanding. The leader firm of family car market is Firm E which occupied nearly one-third market. As for the luxury car market, Firm B accounts for over half of whole market. Additionally, both the Cafav and Climax are dog products in the BCG matrix (Appendix 1) which means low ...

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