What was the percentage change in the quantity demanded

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Reference no: EM131897759

Assignment -

The Scenario

You are the new CEO of Angle, Inc. and will be competing against two companies: Circle and Square. At the start of the simulation, all 3 companies have the same market share and indicators of financial performance. Your decisions on your business model and strategy and skill in executing the strategy (particularly your pricing strategy) over five years will determine who has the best financial performance at the end of this time period and wins the simulation.

While the two competitors may be considered "virtual" in the sense that their actions will be known only to you via the simulation software, they have been programmed in a way that accurately reflects the strategy and tactics of real competition. You will start to know the competitor's goals and year-by-year moves as you play the game.

How to Analyze the Results

The simulation is rich in data and there are numerous steps and sequences you could use to analyze what happened and why the results vary. Here is one possible sequence.

1. How were sales?

a. How many units did you sell? Check the Supply Report.

b. What happened to your inventory? Did it go up, down, or stay relatively the same? Check the Supply Report.

c. How many units did Circle and Square sell? This is easy to calculate. Divide their Revenue by their Price. Revenue is found in the Income Statement and their sales price is on the CEO Dashboard.

d. Determine what caused results. Possible reasons to investigate: (1) your price compared to Circle and Square's prices and (2) the amount you spent on marketing.

2. What was the price elasticity?

a. What was the percentage change in the quantity demanded of my product relative the percentage change in my price?

b. What impact might my levels of spending on marketing have had on my quantity demanded?

c. Is there a cross-elasticity factor involved? Did my competitors change their prices and if so, how might that have affected the quantity demanded for my product?

3. How was my income?

a. What are your revenue, gross profit, operating profit, and net profit? Check the Income Statement.

b. What were the gross profit, operating profit, and net profit for Circle and Square? Check the Income Statement.

c. What are the reasons for your results relative to theirs? Possible reasons to investigate: (1) your price compared to Circle and Square's prices and (2) your spending on marketing, development, and your unit cost.

4. How are my financial ratios?

a. What are your Gross Profit Margin, Operating Profit Margin, and Net Profit Margin? Check the Financial Ratios Report.

b. What trend are you seeing in your ratios year-on-year?

c. What are Circle and Square's Gross Profit Margin, Operating Profit Margin, and Net Profit Margin? What is their trend? How do they compare to your trend?

5. What is going on with inventory levels?

a. You know your inventory level from step 1.

b. What are the inventory levels of Circle and Square? Check the Balance Sheet Report. Why are they different? Possible reason: The company who charged the highest price, probably has the highest level of inventory.

What should you do next?

Once you have analyzed the results, you can follow 1 of 3 possible strategies for the next year.

1. Stick with your current strategy (low cost or differentiation)

2. Switch to the other strategy

3. Experiment with a blend of both business models

Quick Check on Your Understanding of What to Do Next: Suppose in the first year you chose the cost leadership strategy as shown above. Which of the following indicates that you decided to continue with this strategy in the second year of your operation?

Attachment:- Assignment File.rar

Reference no: EM131897759

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