I just need a few paragraphs on Business Outlook/ Simulation Learning/ Finals Remarks for a final paper on Cesim Simulation due in a few hours. Very easy. State
Team Pink expects industry demand to expand beginning of the next round by debuting technology 2 and 3 in our product portfolio. Investing in other technologies will enable Team Pink to start production and expand production facilities etc…
TABLE OF CONTENTS
LETTER TO SHAREHOLDERS 2
COMPANY OVERVIEW 3
REVIEW OF FINANCIAL PERFORMANCE 4
SELECTED FINANCIAL INDICATORS 4
SELECTED LINE ITEM ANALYSIS 6
DISAGGREGATING STOCK PRICE 7
MANAGEMENT’S DISCUSSION AND ANALYSIS 8
COMPETITOR ANALYSIS 10
BUSINESS OUTLOOK 11
SIMULATION LEARNING OUTCOMES 11
FINAL REMARKS 13
Team Green is pleased to report that your firm is the world’s leading cell phone provider.
With the highest share price, level of profitability and return on equity, Team Green has
strived to become a premier transnational organization. Increasing its share price over the
last five rounds, Team Green has persevered through a global recession, a price war and
industry overcapacity. With leading market shares in each of the triad markets, Asia,
Europe and the United States, Team Green is able to offer its customers the most
technology-advanced phones at the lowest price available. Having the industry’s lowest
production costs allows Team Green to sell phones at prices below what it costs many
our competitors to produce them.
Team Green’s success can be attributed to its corporate mission:
“To efficiently manage a portfolio of cell phone technologies in a manner that maximizes
shareholder value by using flexible global production to capitalize on shifting regional
demand.”
By adhering to this mission statement Team Green is able to operate as a portfolio, using
its strengths in certain technologies to subsidize its weaknesses in others. This creates an
organization capable of winning the global chess match played between members of the
cell phone industry.
Team Green is focused on maximizing shareholder value through stable growth. Unlike
its competitors, Team Green’s financial performance is predictable. With the industry’s
lowest earnings volatility, Team Green offers its shareholders consistent performance.
Consistency is achieved through careful planning. By focusing on planning Team Green
is able minimize risk. For instance, Team Green’s use of careful planning helped it avoid
the devastating effects of industry overcapacity. By setting plant expansion equal to
market growth Team Green’s capacity utilization never went below sixty percent. Team
Green also used planning in the development of technology three and four. By planning
research and development years in advance for these technologies Team Green was able
to avoid large unnecessary capital outlays. These outlays plagued our competitors.
Finally, Team Green used careful planning when allocating production of technology
four to both the United States and Asia. While other teams focused solely on Asian
production to move rapidly down the production cost curve, Team Green allocated
production to both Asia and the United States realizing that a market for this technology
would soon develop in the United States.
Team Green is also able to achieve consistent performance by creating and leveraging
knowledge. Through the articulation of tacit knowledge into explicit knowledge using
detailed written memos, Team Green has created a database of explicit knowledge. This
database is used throughout the decision making process when similar business situations
arise. Unlike other companies, who repeatedly make the same mistakes, Team Green’s
knowledge focus ensures that mistakes made in the past are not repeated.
2
Team Green’s knowledge focus has its roots in its administrative heritage. In the third
year of business, Team Green made a grave error. By neglecting research and
development, it found itself two years behind the competition in the debut of technology
two. This led to an array of problems that plagued the organization for several years.
Having gone through this hardship Team Green made it a point to learn from experiences
thus establishing an environment for knowledge creation. As quoted by David Gavin’s in
Building a Learning Organization, “A productive failure is one that leads to insight,
understanding and thus an addition to commonly held wisdom of the organization.”
Looking forward, Team Green plans to continue to focus its attention on sales growth
rather than profitability. Focusing on sales growth has two distinct advantages. First, it
helps increase Team Green’s already large market share. Second, it enables Team Green
to move more rapidly down the production cost curve than its competitors. With lower
production costs and higher market share, Team Green will force industry consolidation.
This will create a more stable, competitive environment in which Team Green will be
able to realize the profits that it is currently deferring.
Gree
n
21 %
InTheBlack
9 %
Ichiban
19 %
G-Sp
ot
17 %
L borracho
7 %
Pink LLP
7 %
Kaputt
11 %
Oran
ge
9 %
With the lowest production costs, most technologically advanced cell phones, and the
highest market share, Team Green is well positioned to maintain its lead in the cell phone
industry. By continuing its focus on careful planning and knowledge creation Team
Green will ensure that this lead is preserved.
Team Green is a globally diversified producer of cell phones focused on producing the
most innovative products at the lowest prices. Striving to become the world’s primer
transnational organization, Team Green has distributed production capacity evenly
3
between the United States and Asia. This gives Team Green the flexibility and
responsiveness needed to operate in a changing global environment.
In order to maximize shareholder value Team Green has centered its efforts on
maintaining constant, sustainable growth. In order to achieve this objective Team Green
manages its individual cell phone technologies as components of a product portfolio.
Management of each component technology in this portfolio changes as it moves through
different stages in the product life cycle. This product life cycle differs between markets.
For example, when a particular technology is in the mature phase of its life cycle in Asia
it is in its emerging phase in the United States. By treating the organization as a portfolio
of products, technologies that are in their mature “cash generating” phase in one market
can be used to subsidize other markets where the same technology is in its “emerging
phase.” The cross subsidization of technologies helps Team Green better manage
business risk which helps facilitate long term planning.
An example of Team Green’s portfolio focus occurred this year with its technology four
brand. Unlike its competitors, who are producing technology four only in Asia in order to
gain a short-term production cost advantage, Team Green is producing technology four in
both Asia and the United States. By producing technology four in both regions, Team
Green will have a competitive advantage when this technology emerges in the US
market. With production capacity already dedicated to technology four in the United
States, Team Green will avoid having to ship product from Asia. Shipping product from
Asia to the United States has a per unit cost of over thirty dollars. This represents a cost
that Team Green will not have to incur thus enabling Team Green to under price the
competition. Without strict adherence to Team Green’s mission statement, it is likely that
the organization would have followed its competition and produced technology four
solely in Asia. However, doing this would have contradicted a key element of the
transnational organization, flexibility. As mentioned by Bartlett and Ghoshal, one of the
three key elements of a transnational corporation is flexibility. A transnational must be
flexible, able to respond to changes in the global environment. When production costs
increased twenty percent in Asia last year those firms that had only produced technology
four in this region were forced to incur higher production costs. Team Green on the other
hand was able to quickly shift technology 4 production to the US avoiding these high
costs.
Selected Financial Indicators
After struggling for several years, Team Green has been able to establish a strong
financial position. This position is reflected in three key ratios; asset turnover, profit
margin, and leverage ratio. These three ratios, when combined into a Dupont Analysis,
determine the company’s return on equity.
ROE = Profit Margin * Asset Turnover * Leverage Ratio
4
Profit Margin
As stated in the Letter to Shareholders, Team Green is focused on sales growth
rather than profitability. Therefore, no attempt has been made to maximize the
company’s profit margin. Nevertheless, the firm’s profit margin last year at 9.2%
exceeded the competition. This figure highlights the importance of production
costs. Despite under pricing our competitors in every market our firm was still
able to achieve a level of profitability over three percentage points greater than
the nearest competitor. This helps refute claims made by other firms in the
industry that Team Green is engaging in unfair pricing.
Asset Turnover
Team Green is focused on maximizing sales growth. Sales growth is a measure of
how efficiently the firm’s assets are being managed. The more sales are generated
per dollar of assets the higher level of firm efficiency. Often organizations
allocate too much of their attention on profitability ignoring the effects of asset
turnover. This is the classic explanation of why companies such as Kmart fail.
Kmart prides itself on having higher profit margins than Wal-Mart yet it ignores
its weaker asset turnover. Team Green is attempting to avoid becoming the next
Kmart by ensuring sales growth ensuring that asset turnover is not sacrificed in
order to maximize profitability.
L
e
v
e
r
a
g
e
R
a
t
i
o
(
Total Assets/Equity)
RONA
-1
0 %
–
5 %
0 %
5 %
10 %
15 %
20 %
25 %
Gr
ee
n
InT
he
Bla
ck
Ich
iba
n
G-
Sp
ot
L b
orr
ac
ho
Pin
k L
LP
Ka
pu
tt
Or
an
ge
Team Green’s leverage ratio, at 2.05 represents a debt to equity ratio of 49%. This
ratio has been held constant throughout the last ten years. Team Green is
confident that a debt of equity ratio of approximately 50% represents the firm’s
optimal capital structure. With this level of debt Team Green is able to obtain the
benefits of financial leverage without sacrificing the flexibility that equity
financing provides.
5
Return on Equity
By combining profit margin, asset turnover and leverage ratio Team Green’s
return on equity is derived. At 27.8%, Team Green’s ROE far exceeds even the
closest competitor, Team Ichiban. This is the result of achieving a proper balance
of profitability, asset utilization and leverage.
0 %
5 %
10 %
15 %
20 %
25 %
30 %
Green InTheBlack Ichiban
ROE
Selected Line Item Analysis
Outsourcing Costs
Unlike some of our competitors, Team Green does not rely on outsourcing.
Outsourcing, although often less expensive than in-house production, does move
Team Green down the production cost curve. The consequence of not moving
down the production cost curve far exceeds the benefits of lower outsourcing
costs. Nevertheless, many of our competitors continue to rely on outsourcing.
Research and Development
Team Green consistently seeks to be among the industry leaders in R&D
expenditure. By spending above industry average on research and development
Team Green is able to move rapidly down the production cost curve creating a
first mover advantage. The only way to achieve low production costs is to spend
liberally on R&D. This is a notion that Team Green learned in its second year of
operation. Not aware of the relationship between R&D and production costs,
Team Green avoided R&D expenditures in effort to become a low cost leader.
This strategy backfired with Team Green found itself debuting its technology two
phone two years after the competition. Being late to the market ensured that Team
Green’s technology two production costs would always be above the competition.
As a result, Team Green never made a profit producing this technology.
6
Cash Reserves
Team Green prides itself on its ability to manage cash inflows and outflows.
Team Green currently has over 500 million in cash reserves. These reserves are a
source of competitive advantage. Cash provides our firm a level of flexibility that
our competitors do not possess. The most liquid of assets, cash can be used to
capitalize on market opportunities as soon as they emerge. For instance, Team
Green plans to increase production capacity next round. Having 500 million in
cash will enable Team Green to purchase plants without having to issue high cost
debt or equity.
As Team Green moves into the cash-generating phase of the business life cycle, it
has begun to repurchase stock. Stock repurchases are made in lieu of dividends in
order to maintain financial flexibility. Once a firm begins issuing dividends it is
obligated to continue their issuance. Although this is not a legal obligation,
cutting dividend payments sends a negative market signal that will place
downward pressure on the firm’s stock price. By repurchasing stock Team Green
avoids entering into a dividend payment obligation giving it the flexibility to cope
with changing market conditions.
In order to maximize stock price, Team Green has spent a considerable amount of time
determining what factors alter it. There are four key stock price determinants. These are
sales growth, market share, EBITDA, and technological capacity. After ten rounds of
observation, it is clear that these variables are largely responsible for a firm’s share price.
Sales Growth and Market Share
The importance of sales growth and market share on stock price can be observed
by analyzing the change in Team Green’s stock price between years eight and
nine. Although Team Green made considerable profits in year nine these profits
were generated by sacrificing market share and sales growth. As a result, Team
Green’s stock price did not increase. This situation also occurred in round two.
Given that stock price remained unchanged, the negative effects of lower sales
and market share growth must have a large impact on share price.
EBITDA
Stock price reflects cash flow generation not profitability. Profitability, as
measured by net income, is comprised of non-cash charges such as depreciation.
Therefore, it is irrelevant when measuring firm performance. A better measure of
firm performance is EBITDA. EBITDA does not include non-cash charges
making it a better indicator of stock price appreciation.
Technological Capacity
The stock market is not interested in the effect research and development has on
the income statement. During round eight, Team Green incurred a fifteen million-
dollar loss. Nevertheless, its stock price increased over twenty dollars per share.
7
This occurred because the stock market ignored research and development
expenditures when measuring performance. Although research and development
is treated as an expenditure on the income statement it more closely resembles a
capital asset. Therefore, the market treats it as a non-cash expenditure.
While our competitors remain fixated on achieving high levels of profitability, Team
Green has focused its attention on maximizing sales growth, EBITDA, and technological
capacity. These are the drivers of share value, not net income. By focusing on these
variables Team Green has established a competitive advantage over the competition that
continue to evaluate performance based on profitability.
Global Market Conditions
The cell phone market has been plagued by four factors; weak demand, oversupply, price
competition, and short product life cycles. These factors have depressed returns causing
the virtual bankruptcy of four of the eight companies in the market. Given that these
firms are bankrupt, they will be expected to leave the market which will help improve
returns. With eight competitors, the cell phone industry resembles a perfectly competitive
market. Perfectly competitive markets are not able to support the level of research and
development necessary to meet customer needs. As companies leave the industry the
market will being to resemble an oligopoly. An oligopoly market structure will reduce
price competition and lengthen product life cycles. Both of these factors will help
increase returns.
Product Portfolio
Team Green offers its customers only the most technologically advanced cell phones.
Selling both technology 4 and technology 3, Team Green targets the highest growth
markets. By doing this it avoids selling older technologies with negative growth rates.
When a technology enters the later stage of its product life cycle production costs among
those producing the technology converge. As firms continue to produce an aging
technology they move into the flatter portion of the production cost curve. When this
occurs Team Green’s production cost advantage ceases to exist. This notion becomes
clear when observing production costs for technology two. The range between production
costs for technology two is $6. When every Team has the same cost structure, the ability
to earn excess returns is removed thus companies selling this technology become
relegated to mediocrity.
Foreign Operations
Team Green manages its global operations to maximize flexibility. By producing all
technologies in both the U.S. and Asia, Team Green is able to shift production to take
advantage of changing market conditions. This helps minimize the negative effects of
market specific occurrences such as increasing tariffs, rising transportation costs, and
labor disputes. Last year, Team Green was able to realize the benefits of flexible global
production when Asian production costs rose by 20%. In order to deal with the higher
Asian production costs, Team Green shifted production of technology 4 to the United
8
States. This enabled Team Green to sell technology 4 cell phones in Europe at a lower
cost than its competitors, who were able to produce only in Asia. The ability to quickly
shift production from one market to another is a key trait of a transnational organization.
Research and Development
At the center of Team Green’s production cost focus is R&D. Without R&D, Team
Green would not have early access to technologies that allow them to move further and
faster down the production cost curve than their competitors. The amount spent on R&D
and licensing is not as important as how and when the spending occurs. In order to take
full advantage of the benefits of R&D companies must focus on careful planning. Not
having the ability to produce an emerging technology in its acceptance stage places a
company at a severe disadvantage for that technology’s entire life.
Without planning, companies are forced to make large, lump sum expenditures to acquire
the ability to produce new technologies. These expenditures could be spread over several
years to minimize the overall cost of acquiring these technologies. An example of this
occurred last year when Team Kaputt spent over 400 million in an attempt to acquire
technology 4. If Team Kaputt had allocated R&D funds toward technology 4 in earlier
years, the cost would have been dramatically lower.
Market Share
Team Green is focused on maintaining the largest aggregate market share even if it
means sacrificing short-term profitability. Having a large market share increases its
control of the market.
improves in later rounds. Thus creating a spiral-effect: increasing market share, which
increases demand, which then increases market share. In addition to increasing demand,
market share represents higher production. As stated above, high production means lower
Green
21 %
InTheBlack
9 %
Ichiban
19 %
G-Spot
17 %
L borracho
7 %
Pink LLP
7 %
Kaputt
11 %
Orange
9 %
9
production costs. Teams with the highest market share tend to have the lowest production
costs. Given the short product life cycle of cell phone technologies, companies cannot
afford to maintain low market shares. Doing so will ensure prohibitively high production
costs.
Merely having the largest aggregate market share is not enough. This market share needs
to be distributed among emerging technologies. Emerging technologies have the steepest
production cost curves, which allows early movers to capitalize on large production cost
differentials. Team Green has confined its market share to technologies 3 and 4 as seen in
the graphs below.
Worldwide Market Share Tech 3
Green
18 %
InTheBlack
13 %
Ichiban
16 %
G-Spot
10 %
L borracho
8 %
Pink LLP
11 %
Kaputt
16 %
Orange
8 %
Worldwide Market Share Tech 4
Green
30 %
InTheBlack
5 %
Ichiban
26 %
G-Spot
29 %
L borracho
0 %
Pink LLP
0 % Orange
10 %
Kaputt
0 %
Team Green has an 18% market share in technology 3 and a 30% market share in
technology 4. Both of these markets are still relatively new. Therefore, by establishing
large market shares in these markets, Team Green is able to build a sizeable separation
between its prices and the competitions. For example, the gap between Team Green’s
technology 4 production costs and Team Orange’s technology 4 production costs are
$170. With such a large differential between prices, teams such as Team Orange, have no
ability to compete on price.
The cell phone industry operates in a competitive environment. In order to succeed in this
environment an organization must understand its competitors’ strengths and weaknesses
and anticipate how these strengths and weaknesses may effect its own team’s strategic
position. For example, product demand is directly related to the technological
competence of competing companies. When several companies hold the same level of
technological competence Team Green’s ability to sell cell phones decreases
dramatically. This was evident in year eight when every Team had acquired the ability to
produce technology three in Asia. As a result, demand was spread over eight teams
leading to weak industry wide demand.
10
Team Green has built a considerable production cost advantage over its competitors.
However, this competitive advantage will not last indefinitely. Team Blue, the nearest
competitor to Team Green, has production costs very similar to Team Green. In addition,
Team Blue has significantly more production capacity. Although having large production
capacity is a liability during times of weak demand, such as the ones characterizing the
current market, it becomes an advantage during times of strong demand. With larger
capacity, Team Blue has the ability to grow its sales and thus its market share more
rapidly. Understanding the threat that this presents, Team Green has begun increasing
plant investment.
In the competitive cell phone industry a company’s actions are as much determined the
competencies of their competition as their own competencies. Therefore, it is important
to make decisions on a relative basis. This is the central concept behind “Game Theory,”
a tool that Team Green used successfully last year to fend off a late fun by Team Blue.
Team Blue, with relatively the same production costs and technological competence as
Team Green threaten to remove Team Green from its industry leading position. However,
through the use of “Game Theory” Team Green was able prevent this from occurring. As
mentioned above, Team Blue possesses more production capacity than Team Green.
Therefore, Team Blue is required to generate a higher level of sales than Team Green in
order to amortize the costs associated with their additional capacity. Given this notion,
Team Blue would be hurt relatively more than Team Green if it did not generate a high
level of sales. Realizing this Team Green lowered its prices stealing demand away from
Team Blue thus preventing them from generating the sales necessary to amortize the
large number of plants they operate. Although this may have hurt Team Green in an
absolute sense, it benefited Team Green on a relative basis. Distinguishing between
absolute and relative is they key behind “Game Theory” and the single most important
factor behind Team Green’s success.
Team Green expects industry demand to increase beginning next year. This will have
implications on Team Green’s strategy. Team Green is currently utilizing its plants at
91% capacity. This exceeds the optimal production level of between 75% to 85%. In
order to lower capacity utilization without sacrificing Team Green’s market leading
position two actions will be taken. Team Green will increase the number of plants in
operation by three. This will enable Team Green to produce more units. However, this
does not solve Team Green’s short-term capacity needs. In order to generate capacity in
the short-term Team Green is going to shift production to its highest margin products.
This means moving away from technology three and into technology four. Team Green is
able to generate the same level of cash flow selling one technology four phone, as it is
able to generate selling two technology three phones. Therefore, the negative impact of
this strategy will be marginal.
Logistics
11
Managing an organization with operations in various regions is extremely complex. This
complexity was not fully appreciated until participating in this simulation. A global
organization must deal with an array of problems that a national organization never faces.
These include issues such as the managing of transfer prices to avoid income taxes; the
movement of cash between divisions to meet short-term needs; and the shifting of
production to take advantage of favorable factor costs. All of these issues came into play
during the decision-making process for year nine. Production needed to be shifted from
Asia to the U.S., cash needed to be reallocated to the U.S. from both Europe and Asia,
and transfer prices need to be adjusted upward to the European market.
Demand
Several factors play a role in determining demand. These include factors other than
simply price and marketing. Not only is demand determined by pricing and promotion, it
is determined by the actions of competitors as well as existing market share. This was not
fully understood prior to the simulation. The simulation provided a dynamic, learning
environment in which multiple demand determinants were allowed to interact in a
realistic manner.
Competitor Activities
In the business world, the actions of competitors are unpredictable and in many cases
irrational. This makes it difficult to formulate decisions that take into account the actions
of competitors. Team Green attempted to be proactive by anticipating competitor
movement and responding accordingly. Unfortunately, teams often acted in a counter-
intuitive manner causing great turbulence in the market. In year eight, Team Green
expected five teams to enter the technology 4 market. However, despite the fact that they
had the ability, some teams did not enter the market. Team Green … in demand to
account for five teams’ worth of production. Nevertheless, only three teams produced
technology 4, which left Team Green without enough products to satisfy the market’s
demand.
Risk Assessment
Being too risk-adverse is risky in itself. Early in the simulation, Team Green was too
cautious in regards to spending for R&D and licensing. By not spending enough, Team
Green was placed at a severe disadvantage for the rollout of technology 2. This
disadvantage was so great that Team Green was forced to abandon all attempts to be
competitive in this technology. The technology 2 blunder proved to be a valuable lesson
that followed Team Green throughout the entire simulation. Often being risk adverse
means taking a loss to subsidize future growth. Not realizing this in the first years of
operation, Team Green was forced to incur much higher levels of risk in later rounds.
Learning
Team Green realized the benefits of learning early in the simulation. This enabled it to
avoid repeating its own mistakes, and the mistakes of its competitors. As was seen in the
Phillips case, often technologies such as the V2000 that may be technologically superior
are not accepted by the market. Team Green used the knowledge gained from this case to
avoid making the mistake of selling a cell phone technology that has not yet developed a
12
market. Had Teams, such as Team Blue and Team Grey, developed the same level of
learning, they would have made the same mistakes.
The Global Simulation provided an excellent opportunity for Team Green to build
managerial skills. By forcing students to make decisions in a dynamic environment, the
global simulation was able to build business skills in ways traditional textbooks are not
able to do.
13
>Results
, , 66
,666
9,9 3
,4 7,904
1, 2
, 3
4,853
2
8,2 ,5 ,411
costs
6,961
6
4, 0 0 0,265
2
0 0 0 0 0 0 ,000
5,077
,7 4,849
9
,610
,496
,571
,189
,779
, , 0 ,071
,451
215,156 Green Blue Orange Grey Ochre Pink 0 0 0 0 0 0 ,372
assets
,404
330,000 0 0 1,102,071 -139,451 -2,633,539 925,553 236,056 215,156 ,540
,808
0 0 0 48,052 2,565,388 1,132,404 2,926,083 3,948,386 2,601,643 712,845 Green Blue Orange Grey Ochre Pink ,554
Costs and expenses 0 0 0 0 0 0 R&D 0 0 0 0 0 0 86,103 86,103 0 0 0 0 ,760
,595
40,465 40,465 ,083
0 0 27,803 0 0 ,852
-87,705 -1,149,213 -61,091 -37,088 Green Blue Orange Grey Ochre Pink 229,301 229,301 Inventory 0 0 0 0 0 0 2,000 2,000 2,000 SHAREHOLDERS’ EQUITY AND LIABILITIES Additional paid-in capital 0 0 109,094 1,025,773 2,038,429 90,332 73,700
Liabilities 1,239,841 0 0 485,000 Green Blue Orange Grey Ochre Pink 236,745 87,210 -108,595 467,165 40,794 53,897 0 0 0 0 0 0 9,890 0 0 0 0 ,593
0 0 0 0 0 0 143,593 -46,358 -980,015 325,160 50,136 16,996 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 46,358 0 ,705
0 150,000 ,000
46,358 980,015 150,000 0 0 0 2,000 2,000 2,000 2,000 231,146 2,000 2,000 2,000 495,669 19,291 Green Blue Orange Grey Ochre Pink 0 0 1,988,470 1,142,972 Costs and expenses ,214
,510
0 0 R&D 0 0 0 0 0 0 90,000 20,000 12,000 ,854
132 244,306 Green Blue Orange Grey Ochre Pink Inventory 0 0 0 0 0 0 2,000 2,000 2,000 ,274
SHAREHOLDERS’ EQUITY AND LIABILITIES ,572
Liabilities 0 0 485,000 Green Blue Orange Grey Ochre Pink Costs and expenses ,000
18,000 150,000 20,000 8,000 10,000 10,000 10,000 10,000 10,000 11,852 1,151 0 0 0 -31,935 -149 7,939 Green Blue Orange Grey Ochre Pink 2,000 ,720
SHAREHOLDERS’ EQUITY AND LIABILITIES ,920
Liabilities 313 and key financial indicators
Green Blue Orange Grey Ochre Pink 549 117 248 106 144 0 0 0 0 0 0 n/a Green Blue Orange Grey Ochre Pink -9 n/a n/a n/a n/a 281 n/a n/a Green Blue Orange Grey Ochre Pink 0 0 32.51 0 0 0 0 0 0 0 0 5.76 Green Blue Orange Grey Ochre Pink 200 460 235 7 10 7 5 23 1,202 23 458 394 180 Green Blue Orange Grey Ochre Pink 1.52 0 0 0 0 0 0 0 0 0 0 Green Blue Orange Grey Ochre Pink 2,150 1,200 Number of offered features 7 10 7 5 664 Tech 2 2,000 Tech 3 2,209 Tech 4 Green Blue Orange Grey Ochre Pink 0 0 0 0 0 0 0 Green Blue Orange Grey Ochre Pink 180 200 Number of offered features 7 10 7 5 112 Tech 2 220 730 Tech 3 0 Tech 4 796 36 Green Blue Orange Grey Ochre Pink 0 0 0 0 0 0 0 report
Green Blue Orange Grey Ochre Pink 642 130 591 412 USA Asia USA 7 42 99 19 69 23 Asia 203 458 655 84 1,105 1,482 730 1,558 186 147 USA 12 12 21 12 17 13 USA 12 12 21 12 17 13 Green Blue Orange Grey Ochre Pink 0 0 0 0 0 29.60 USA 128 Asia 303 295 USA Asia USA 128 166 259 105 112 146 135 Asia 98.37 129 Tech 2 61.82 115 Tech 4 120 128 166 259 128 146 102 USA Asia 4.34 Green Blue Orange Grey Ochre Pink 0 0 0 0 3,849 1,000 2,942 4,852 0 0 0 0 0 0 Asia 2,014 0 2,298 4,346 0 0 0 0 0 0 Unsatisfied demand 0 0 0 0 -634 -117 -186 -112 Unsatisfied demand 0 0 0 0 Green Blue Orange Grey Ochre Pink 0 0 0 0 Asia -1,621 0 0 0 Europe Unsatisfied demand 0 0 0 Green Blue Orange Grey Ochre Pink 0 Asia 0 Cut production 0 0 0 0 Europe 0 Green Blue Orange Grey Ochre Pink 4,506 1,864 642 0 0 576 0 645 Asia 757 0 0 413 Unsatisfied demand 0 0 0 0 Unsatisfied demand 0 0 0 0 Green Blue Orange Grey Ochre Pink Asia 0 12.85 Europe 29.60 29.60 FinalPaper – Team Pink Dimitrios Gourdomichalis Lenny Gonzalez Daniella Bautista TABLE OF CONTENTS
Letter to Shareholders 2
Company Overview 4
Review of Financial Performance 5
Profit Margin 5
Asset Turnover 6
Equity Multiplier 6
DuPont’s ROE 7
Business Outlook 8
Simulation Learning Outlook 9
Final Remarks 10
Team Pink is pleased to present the annual company filings, closing the financial year as the 5th largest mobile technology retailer. With increasing sales units in the last five rounds across all markets, the firm demonstrates its effort to become the best mobile technology retailer in the hearts of its customers, through quality and affordable products. With operations in Europe, the USA, and Asia, the firm continuously leverages a highly localized internationalization strategy to unlock competitive advantages in its highly competitive and volatile business environment. With the lowest in-house manufacturing cost for Technology 1 in its Asian plants, the firm aims to leverage the cost advantages in one of the fastest growing mobile markets, growing its market share through quality and affordable technology. These cost advantages in production costs are critical to support the company’s cost leadership strategy, whose benefits are transferred to our customers through low-priced products. To achieve its cost leadership strategy, the company’s focus on efficiency involves a focused differentiation strategy, concentrating on achieving market leadership in specific technologies, particularly technology 1 and 4. This business-level strategy is critical to support the company’s corporate mission statement, which is ‘to focus on maximizing the company’s unique resources and competencies through a tech-based product innovation strategy to offer value maximizing products at affordable prices.’ This focus on developing competitive advantages in the two technologies is suited to minimize the company’s risks in its markets. This strategy is critical for the company to compete favorably in a highly concentrated market, where companies compete with almost homogenous products. Focusing on specific technologies was necessary to avoid significant capital outlays that threatened its cost leadership strategy. The company’s product efficiencies in technology one will neutralize the logistics and production costs in other segments. With the industry’s third lowest earning volatility, Team Pink illustrates its concerted efforts to provide its shareholders with consistent earnings performance. However, during the period, the company has faced diversified risks in its micro and macro environments. The company’s critical strategic issues emerge from inefficiencies that are attributable to its focused differentiation strategy in a market where growth is disproportionate across different technologies. Despite strategically expanding its manufacturing plants to accommodate and capture market growth, the continued focus on two technologies meant it held the lowest number of production plants and the least number of manufactured units. However, despite the need for cost minimization, the firm has diversified its production in US and Asia, carefully allocating resources using a data-driven expansion strategy to maximize capacity utilization. As a result, the company’s capacity utilization peaked at 77% in the US and 55% in Asia. As we advance, the company acknowledges the primary need to embrace research and development to support its debut in technologies 2 and 3. The company is well positioned to leverage its shared resources and competencies to introduce technology two and three in its product portfolio. A broad product portfolio is a critical tenet of cost leadership strategy focusing on maximizing economies of scale to unlock unique cost containment tools and capacity utilization. At Team Pink, we acknowledge emerging risks and remain open to functional, business, and corporate-level changes. With the second lowest market share, this strategy is consistent with the company’s forward-looking strategy that focuses on increasing sales and market share rather than profitability. By maximizing production efficiency and sales, Team Pink will unlock two critical success factors in the industry. Figure 1: Global market shares percentages With its unique efficiencies in technology 1 and 4, Team Pink is well positioned to leverage its shared resources and competencies to achieve competitiveness by debuting technology 2 and 3. By focusing on data-driven and tech-based innovation, Team Pink can broaden its product portfolio, a permanent competitive advantage in the current market. Team Pink is a multinational mobile phone manufacturer in the United States. The building blocks of the company’s cost leadership strategy are efficiency, quality innovation, and customer responsiveness. In a highly globalized and technologically advanced business environment, the firm has strategically leveraged a multi-staged internationalization strategy to expand its production capabilities beyond the US into Asia to achieve the flexibility (leanness and agility) required to operate in a highly volatile and complex market. For example, when the production costs increased by 20% in Asia, causing a sharp increase in production costs for firms that produced Technology 4 in this market, Team Pink’s responsiveness was illustrated when the firm shifted its operations to the United States. Team Pink continues to leverage its functional production area to support its cost leadership strategy. Team Pink has been forced to implement this strategy in a highly competitive industry due to the limited expansion opportunities in the existing market and product categories. At Team Pink, product development takes place in three approaches: quality products that resonate with consumer trends, new products that resonate with existing products, and new products that reinvent current items. Despite sharing resources and competencies, the company’s business model views each product as a unique strategic business unit, independent of the other. This operational structure allows the granulation of the company’s mission, vision, and goals to suit each business unit. This structure allows each unit to set realistic goals and manage their risk factors more efficiently through improved focus, which is essential for value maximization across the different value chain activities for each product in specific markets. This report will apply the DuPont model to evaluate the company’s financial performance. This model breaks down into the formula DuPont method ROE = Profit margin * Asset turnover * equity multiplier As discussed before, the company’s forward-looking strategy aims to improve the company’s market share through increasing sales over profitability. Therefore, the firm’s efforts do not primarily aim to maximize income. However, despite this focus, the firm has achieved a 15.39% profit margin, the third highest in the market after Team Green and Grey. This favorable position amplifies the importance of the company’s cost containment measures in its production function. Despite the intense price competition that adversely affected profit margins, low production costs ensured the firm achieved favorable profitability. Asset turnover is an efficiency ratio that measures how efficiently a firm utilizes its assets to generate sales. The higher the sales/$ assets, the higher the efficiency, meaning a higher ratio is preferable. With an asset turnover ratio of 1.96, Pink is more efficient than its closest competitors, Green and Grey. The equity multiplier is a risk indicator that measures the portion of a company’s assets financed by stockholder’s equity rather than by debt. A lower ratio indicates a firm has a lower financial leverage. With an equity multiplier of 4.13, Team Pink has the highest leverage among its peers, meaning it faces considerable risks that come with higher financial leverage. Figure 2: Key performance indicators of top competitors Using the DuPont model, the company’s return on equity is 121%, the highest among the three competitors, as shown in figure 2 above. This performance is favorable and illustrates the company’s balance in profitability, asset utilization, and financial leverage. FinalPaper – Team Pink Dimitrios Gourdomichalis Lenny Gonzalez Daniella Bautista TABLE OF CONTENTS
Letter to Shareholders 2
Company Overview 4
Review of Financial Performance 5
Profit Margin 5
Asset Turnover 6
Equity Multiplier 6
DuPont’s ROE 7
Business Outlook 8
Simulation Learning Outlook 9
Final Remarks 10
Team Pink is pleased to present the annual company filings, closing the financial year as the 5th largest mobile technology retailer. With increasing sales units in the last five rounds across all markets, the firm demonstrates its effort to become the best mobile technology retailer in the hearts of its customers, through quality and affordable products. With operations in Europe, the USA, and Asia, the firm continuously leverages a highly localized internationalization strategy to unlock competitive advantages in its highly competitive and volatile business environment. With the lowest in-house manufacturing cost for Technology 1 in its Asian plants, the firm aims to leverage the cost advantages in one of the fastest growing mobile markets, growing its market share through quality and affordable technology. These cost advantages in production costs are critical to support the company’s cost leadership strategy, whose benefits are transferred to our customers through low-priced products. To achieve its cost leadership strategy, the company’s focus on efficiency involves a focused differentiation strategy, concentrating on achieving market leadership in specific technologies, particularly technology 1 and 4. This business-level strategy is critical to support the company’s corporate mission statement, which is ‘to focus on maximizing the company’s unique resources and competencies through a tech-based product innovation strategy to offer value maximizing products at affordable prices.’ This focus on developing competitive advantages in the two technologies is suited to minimize the company’s risks in its markets. This strategy is critical for the company to compete favorably in a highly concentrated market, where companies compete with almost homogenous products. Focusing on specific technologies was necessary to avoid significant capital outlays that threatened its cost leadership strategy. The company’s product efficiencies in technology one will neutralize the logistics and production costs in other segments. With the industry’s third lowest earning volatility, Team Pink illustrates its concerted efforts to provide its shareholders with consistent earnings performance. However, during the period, the company has faced diversified risks in its micro and macro environments. The company’s critical strategic issues emerge from inefficiencies that are attributable to its focused differentiation strategy in a market where growth is disproportionate across different technologies. Despite strategically expanding its manufacturing plants to accommodate and capture market growth, the continued focus on two technologies meant it held the lowest number of production plants and the least number of manufactured units. However, despite the need for cost minimization, the firm has diversified its production in US and Asia, carefully allocating resources using a data-driven expansion strategy to maximize capacity utilization. As a result, the company’s capacity utilization peaked at 77% in the US and 55% in Asia. As we advance, the company acknowledges the primary need to embrace research and development to support its debut in technologies 2 and 3. The company is well positioned to leverage its shared resources and competencies to introduce technology two and three in its product portfolio. A broad product portfolio is a critical tenet of cost leadership strategy focusing on maximizing economies of scale to unlock unique cost containment tools and capacity utilization. At Team Pink, we acknowledge emerging risks and remain open to functional, business, and corporate-level changes. With the second lowest market share, this strategy is consistent with the company’s forward-looking strategy that focuses on increasing sales and market share rather than profitability. By maximizing production efficiency and sales, Team Pink will unlock two critical success factors in the industry. Figure 1: Global market shares percentages With its unique efficiencies in technology 1 and 4, Team Pink is well positioned to leverage its shared resources and competencies to achieve competitiveness by debuting technology 2 and 3. By focusing on data-driven and tech-based innovation, Team Pink can broaden its product portfolio, a permanent competitive advantage in the current market. Team Pink is a multinational mobile phone manufacturer in the United States. The building blocks of the company’s cost leadership strategy are efficiency, quality innovation, and customer responsiveness. In a highly globalized and technologically advanced business environment, the firm has strategically leveraged a multi-staged internationalization strategy to expand its production capabilities beyond the US into Asia to achieve the flexibility (leanness and agility) required to operate in a highly volatile and complex market. For example, when the production costs increased by 20% in Asia, causing a sharp increase in production costs for firms that produced Technology 4 in this market, Team Pink’s responsiveness was illustrated when the firm shifted its operations to the United States. Team Pink continues to leverage its functional production area to support its cost leadership strategy. Team Pink has been forced to implement this strategy in a highly competitive industry due to the limited expansion opportunities in the existing market and product categories. At Team Pink, product development takes place in three approaches: quality products that resonate with consumer trends, new products that resonate with existing products, and new products that reinvent current items. Despite sharing resources and competencies, the company’s business model views each product as a unique strategic business unit, independent of the other. This operational structure allows the granulation of the company’s mission, vision, and goals to suit each business unit. This structure allows each unit to set realistic goals and manage their risk factors more efficiently through improved focus, which is essential for value maximization across the different value chain activities for each product in specific markets. This report will apply the DuPont model to evaluate the company’s financial performance. This model breaks down into the formula DuPont method ROE = Profit margin * Asset turnover * equity multiplier As discussed before, the company’s forward-looking strategy aims to improve the company’s market share through increasing sales over profitability. Therefore, the firm’s efforts do not primarily aim to maximize income. However, despite this focus, the firm has achieved a 15.39% profit margin, the third highest in the market after Team Green and Grey. This favorable position amplifies the importance of the company’s cost containment measures in its production function. Despite the intense price competition that adversely affected profit margins, low production costs ensured the firm achieved favorable profitability. Asset turnover is an efficiency ratio that measures how efficiently a firm utilizes its assets to generate sales. The higher the sales/$ assets, the higher the efficiency, meaning a higher ratio is preferable. With an asset turnover ratio of 1.96, Pink is more efficient than its closest competitors, Green and Grey. The equity multiplier is a risk indicator that measures the portion of a company’s assets financed by stockholder’s equity rather than by debt. A lower ratio indicates a firm has a lower financial leverage. With an equity multiplier of 4.13, Team Pink has the highest leverage among its peers, meaning it faces considerable risks that come with higher financial leverage. Figure 2: Key performance indicators of top competitors Using the DuPont model, the company’s return on equity is 121%, the highest among the three competitors, as shown in figure 2 above. This performance is favorable and illustrates the company’s balance in profitability, asset utilization, and financial leverage.
2
Profit and Loss statement, k USD, Global
Green
Blue
Orange
Grey
Ochre
Pink
Sales revenue
4
7
3
8
9
2,
42
0
8
1
5
3,334,327
1,9
24
52
1,
39
Costs and expenses
Variable production costs
1,
48
10
348,665
69
84
1,
15
435,
46
58
55
Feature costs
730
99
403,557
150,
100
324,224
243
185,641
Contract manufacturing
21
373,
12
38
147
451,081
Transportation and tariffs
17
91,730
25,8
93
63,784
118,
16
79,415
R&D
Promotion
330,000
383,000
55,000
380,000
60,000
36
Administration
19
150,270
208
68
167,193
155,727
13
Costs and expenses total
3,124,005
1,750,347
893,750
2,090,053
1,463,841
1,024,160
OPERATING PROFIT BEFORE DEPR. (EBITDA)
1,614,962
670,
31
-73,797
1,244,274
460
3
73,744
Depreciation from fixed assets
341,596
160,109
467,839
250
214
112
OPERATING PROFIT (EBIT)
1,273,366
510,210
-541,636
993
246,039
261,555
Net financing expenses
-4,064
637,810
2,090,753
40,4
23
–
28
642
46,399
PROFIT BEFORE TAXES
1,
277
430
-127,
600
-2,632,389
953,355
274,680
215,156
Income taxes
175,359
11,852
1,151
27,803
38,624
PROFIT FOR THE ROUND
1,
102
–
139
-2,633,539
925,553
236,056
Balance sheet, k USD, Global
ASSETS
Fixed assets
1,935,709
907,282
2,651,087
1,419,475
1,215,905
635,735
Inventory
Receivables
182,450
93,196
31,568
128
74,091
53,819
Cash and cash equivalents
447,229
131,926
243,427
2,400,539
1,311,647
23,291
Total
2,565,388
1,
132
2,926,083
3,948,386
2,601,643
712,845
SHAREHOLDERS’ EQUITY AND LIABILITIES
Equity
Share capital
355,900
349,000
460,000
485,000
35
2,000
Additional paid-in capital
109,094
1,025,773
2,038,429
90,332
Profit for the round
Retained earnings
647,569
-3,318,423
-8,931,363
-771,969
-205,894
-484,957
Total equity
2,
105
-3,127,875
-11,
106
1,639,356
2,553,590
172,532
Liabilities
Long-term debts
359,789
709,789
534,789
1,009,789
439,789
Short-term debts (unplanned)
3,503,632
13,473,848
1,239,841
67,672
Payables
100,059
46,857
24,254
59,400
48,052
32,852
Total liabilities
459,848
4,260,279
14,032,891
2,309,030
540,
313
Total shareholders’ equity and liabilities
Profit and Loss statement, k USD,
USA
Sales revenue
from markets
1,287,
144
486,522
96,794
847,283
573,
664
199,086
from internal transfers
451,191
249
140,371
569,846
353,472
397,287
Sales revenue total
1,738,335
736,077
237,165
1,417,128
927,136
596,374
Variable production costs
712,306
212,547
30,583
620,699
187,485
422,042
Feature costs
274,684
71,573
10,002
103,162
52,785
14,953
Contract manufacturing costs 216,961
170,644
172,215
184,755
Transportation and tariffs
22,933
29,829
Promotion
100,000
10
8,000
18,000
140,000
20,000
16,000
Administration
86,103
114,960
102,524
89,482
Costs of imported products
88,603
308,963
Costs and expenses total
1,501,590
648,866
345
949,963
886,342
542,476
OPERATING PROFIT BEFORE DEPR. (EBITDA)
236,745
87,210
–
108
467,165
40,794
53,897
Depreciation from fixed assets
40,465
170,214
111,776
51,427
OPERATING PROFIT (EBIT)
196,
280
46,745
-278,809
426,700
-70,981
2,470
Net financing expenses
6,197
134,450
870,404
107,267
–
9,890
39,559
PROFIT BEFORE TAXES
190
-87,705
-1,149,213
319,433
-61,091
-37,088
Income taxes
72,232
PROFIT FOR THE ROUND
117
291,630
Balance sheet, k USD, USA
ASSETS Fixed assets
229,301
964,545
633,395
291,420
Receivables
49,555
18,731
3,727
32,620
22,086
7,665
Cash and cash equivalents
231,
146
495,669
19,291
Total assets
510,002
250,032
970,271
263,921
1,151,150
318,375
Equity Share capital
315,900
2
90,000
309,000
420,000
445,000
3
12,000
Profit for the round 117,852 -87,705 -1,149,213 291,630 -61,091 -37,088
Retained earnings
209,226
-1,498,730
-4,677,255
-75,980
-9
-988,482
Total equity
642,978
-1,296,435
-5,408,374
1,661,422
1,448,638
-623,238
Long-term debts 359,789 709,789 534,789 1,009,789 0 439,789 Short-term debts (unplanned) 0
349,170
5,791,663
Internal loans
-540,000
4
70,000
44,000
-3,675,000
-315,000
Payables
47,
235
17,508
8,193
27,869
17,512
16,824
Total liabilities
-132,976
1,546,467
6,378,
645
-1,397,501
-297,488
941,613
Total shareholders’ equity and liabilities 510,002 250,032 970,271 263,921 1,151,150 318,375
PARENT COMPANY’S CASH FLOW STATEMENT, k USD
Cash provided by operating activities
Operating profit before depreciation (EBITDA)
Change in receivables (incr – / decr +)
-13,202
2,252
-2,434
-2,052
-16
-645
Change in inventories (incr – / decr +)
Change in payables (incr + / decr -)
-1,521
-1,369
1,418
-4,883
-532
3,
303
Net financing expenses
-6,197
-134,450
-870,404
-107,267
-39,559
Income taxes
-72,232
-27,803
Total
143
–
46,358
–
980,015
325,160
50,136
16,996
Cash provided by investment activities
Plant investments
Cash flow before financing activities
Cash provided by financing activities
Dividends
Proceeds from equity issues and buybacks
-1,709,784
Dividends received from subsidiaries
202,919
Change in long-term debt (incr + / decr -)
150,000
-500,000
Change in short-term debt (incr + / decr -)
980,215
824,840
–
299
Change in internal loans
1,260,000
–
200
-650,000
300
Total
-96,865
-325,160
295
Change in cash and cash equivalents
46,728
200,136
17,291
Cash 1.1.
184,418
295,533
Cash 31.12.
Profit and Loss statement, k USD,
Asia
Sales revenue from markets
1,915,432
1,493,565
481,795
1,988,470
1,053,328
1,142,972
from internal transfers
213,028
377
17,217
506,741
Sales revenue total
2,128,460
1,493,943
499,012
1,560,069
Variable production costs
768,797
136,118
39,261
534,154
247,976
166
Feature costs
144,737
272,310
98,079
183,682
168
166,915
Contract manufacturing costs 0
202,482
211,932
266,326
Transportation and tariffs 0
32,219
1,347
17,682
62,710
75,062
Promotion 70,000 140,000
19,000
Administration
98,975
54,167
83,808
71,090
43,
203
35,367
Costs of imported products 0
111,194
14,519
281
329,817
382,214
Costs and expenses total
1,082,508
948,490
467,944
1,178,462
1,138,541
837,773
OPERATING PROFIT BEFORE DEPR. (EBITDA)
1,045,952
545,453
31,068
810,009
421,528
305,199
Depreciation from fixed assets
301,131
119,644
297,625
210,031
102,
796
60,762
OPERATING PROFIT (EBIT)
744,821
425,810
-266,557
599,978
318,732
244,438
Net financing expenses
-9,
858
503,935
1,221,537
-65,
879
-17,188
PROFIT BEFORE TAXES
754,679
-78,126
-1,488,094
665,857
335,921
244,306
Income taxes 0 0 0 0 38,624 0
PROFIT FOR THE ROUND 754,679 -78,126 -1,488,094 665,857
297,296
Balance sheet, k USD, Asia
ASSETS Fixed assets
1,706,408
677,982
1,686,543
1,190,174
582,510
344,315
Receivables 73,744
57,502
18,
549
76,556
40,553
44,004
Cash and cash equivalents
200,144
2,139,807
482,211
Total assets
1,980,296
737,484
1,707,092
3,406,537
1,105
390,
320
Equity
Share capital 20,000 20,000 20,000 20,000 20,000 20,000
Profit for the round 754,679 -78,126 -1,488,094 665,857 297,296 244,306
Retained earnings
-392,554
-2,233,613
-4,495,998
-1,082,637
274,276
175,512
Total equity
382,125
-2,291,739
-5,964,091
-396,780
591
439,817
Short-term debts (unplanned) 0
3,154,462
7,682,185
39,787
Internal loans
1,563,000
-150,000
-24,500
3,775,000
-105,000
Payables
35,171
24,760
13,499
28,317
28,703
15,715
Total liabilities
1,598,171
3,029,223
7,671,183
3,803,317
513,703
-49,498
Total shareholders’ equity and liabilities 1,980,296 737,484 1,707,092 3,406,537 1,105,274 390,320
Profit and Loss statement, k USD,
Europe
Sales revenue Sales revenue
1,536,390
440,578
241,364
498,575
297,460
55,846
Feature costs
311,178
59,674
42,018
37,380
22,
115
3,773
Transportation and tariffs
147,332
59,511
24,546
46,102
25,622
4,353
Promotion
160,000
135
Administration
10,000
Costs of imported products
575,615
138,738
143,070
287,992
221,434
15,073
Costs and expenses total
1,204,125
402,922
237,
634
531,474
299,172
41,199
OPERATING PROFIT BEFORE DEPR. (EBITDA)
332,265
37,
655
3,730
-32,899
-1,712
14,648
Depreciation from fixed assets 0 0 0 0 0 0
OPERATING PROFIT (EBIT) 332,265 37,655 3,730 -32,899 -1,712 14,648
Net financing expenses
-403
–
576
-1,188
-965
-1,563
6,709
PROFIT BEFORE TAXES
332,668
38,231
4,918
-31,935
-149
7,939
Income taxes
103,127
PROFIT FOR THE ROUND
229,541
26,379
3,767
Balance sheet, k USD, Europe
ASSETS Fixed assets 0 0 0 0 0 0
Receivables
59,151
16,962
9,293
19,195
11,452
2,150
Cash and cash equivalents
15,939
127,926
239,427
258,732
333,766
Total assets
75,090
144,888
248
277,928
345,219
4,150
Equity
Share capital 20,000 20,000 20,000 20,000 20,000 20,000 Profit for the round 229,541 26,379 3,767 -31,935 -149 7,939
Retained earnings
830,896
413
241,890
386,648
493,529
328,014
Total equity
1,080,437
460,299
265,657
374,714
513,381
355,953
Short-term debts (unplanned) 0 0 0 0 0
27,884
Internal loans
-1,023,000
-320,000
-19,500
-100,000
-170,000
-380,000
Payables
17,653
4,589
2,563
3,214
1,838
Total liabilities
-1,005,347
-315,411
-16,937
-96,786
-168,162
-351,803
Total shareholders’ equity and liabilities 75,090 144,888 248,720 277,928 345,219 4,150
Ratios
Ratios
Market capitalization of the company, k USD
17,354,080
3,406,066
10,401,295
4,700,173
1,479,372
Shares outstanding at the end of round, k shares
31,590
29,000
30,900
42,000
44,500
3
1,200
Share price at the end of round, USD
47.42
Average trading price during the round, USD
487
65.71
71.04
15.05
Dividend yield, %
P/E ratio
15.75
n/a
1
1.24
19.91
6.88
Cumulative total shareholder return (p.a.), %
14.73
-5.36
-63.77
3.85
-6.59
-15.53
Key financial indicators, %
Operating profit before depreciation (EBITDA)
34.08
27.69
37.32
23.93
26.74
Operating profit (EBIT)
26.87
21.08
-66.06
29.80
12.78
18.71
Return on sales (ROS)
23.26
–
5.76
-321
27.76
12.27
15.39
Equity ratio
82.07
4
1.52
98.15
24.20
Net debt to equity (gearing)
-4.15
-9.21
-51.36
Return on capital employed (ROCE)
47.26
44.50
-17.29
30.45
10.10
34.54
Return on equity (ROE)
45.74
78.66
9.69
331
Earnings per share (EPS), USD
34.89
-4.81
-85.23
22.04
5.30
6.90
Market report, global
Global market shares, %
Total
32.51
17.90
4.55
20.69
13.53
10.83
Tech 1
38.77
4.41
24.30
Tech 2
62.86
21.06
16.08
Tech 3
38.57
25.09
36.34
Tech 4
42.23
37.45
14.55
Market report, USA
Tech 1
Selling Price, USD
220
Number of offered features
Sales, k units
1,202
458
394
Demand, k units
Tech 2
Selling Price, USD 208
480
Number of offered features 7 8
Sales, k units
1,433
180
Demand, k units
2,562
Tech 3
Selling Price, USD 280 300
Number of offered features 4 5
Sales, k units 879 858
Demand, k units 879
1,026
Tech 4
Selling Price, USD 249 320 250 430
Number of offered features 9 7 3 2
Sales, k units
3,972
1,843
1,864
262
Demand, k units 3,972 1,843 1,864 262
USA market shares, %
Total
40.44
15.57
20.21
17.37
4.90
Tech 1 0
57.88
1.11
22.05
18.97
Tech 2
88.87
11.13
Tech 3 0
50.61
49.39
Tech 4
50.02
23.21
23.48
3.29
Market report, Asia
Tech 1
Selling Price, RMB
1,400
1,500
Sales, k units
5,221
3,781
5,
412
Demand, k units 5,221 664 3,781
5,412
Selling Price, RMB
1,550
1,700
Number of offered features 3 8 1
Sales, k units
3,465
1,214
1,621
Demand, k units 3,465 1,214 1,621
Selling Price, RMB
1,450
2,100
1,300
Number of offered features 2 4 3
Sales, k units
6,864
2,209
5,610
Demand, k units
7,582
9,823
Selling Price, RMB
2,500
3,500
Number of offered features 4 1
Sales, k units
3,446
757
Demand, k units 3,446 757
Asia market shares, %
Total
25.65
18.45
4.66
22.49
13.42
15.32
Tech 1 0
34.63
4.40
25.07
35.90
Tech 2 55 0
19.27
25.73
Tech 3
46.75
15.04
38.21
Tech 4 0 0 0
81.99
18.01
Market report, Europe
Tech 1
Selling Price, EUR
130
240
Sales, k units 634 117
186
Demand, k units 634 117 186 112
Selling Price, EUR
201
Number of offered features 10 8
Sales, k units
1,438
Demand, k units 1,438 730
Selling Price, EUR 190 200
Number of offered features 4 3
Sales, k units
1,377
Demand, k units 1,377
1,388
Selling Price, EUR 243 250 250 600
Number of offered features 10 4 3 2
Sales, k units
3,749
1,558
Demand, k units 3,749 1,558 796 36
Europe market shares, %
Total
48.34
18.74
7.89
14.52
9.14
1.37
Tech 1 0
60.50
11.14
17.71
10.65
Tech 2
66.34
33.66
Tech 3 0 100 0 0 0 0
Tech 4
61.08
25.38
12.96
0.58
Production
In-house manufacturing, k units
USA
Tech 1
3,849
2,942
4,852
Tech 2 143
Tech 3 858
Tech 4
6,158
4,506
Asia
Tech 1
3,208
1,482
1,066
Tech 2
6,336
Tech 3 6,864 5,610
Tech 4
2,341
Contract manufacturing, k units
Tech 1
1,000
Tech 2
850
1,953
Tech 3
2,267
Tech 4
1,562
Tech 1 850
Tech 2 1,000
Tech 3
2,213
Tech 4
2,069
Capacity usage, %
Tech 1 58 31 68
Tech 2 1
Tech 3 13
Tech 4 93 68 9
Free capacity
Tech 1 58 38 39
Tech 2 48 1
Tech 3 52 68
Tech 4 28 15 15
Free capacity 0 42 99 4 46 46
Origin of products sold in USA, k units
USA 3,972
2,081
2,701
Asia 1,433 1,864
Origin of products sold in Asia, k units
USA
2,014
3,919
4,691
Asia
10,329
5,417
1,793
7,951
1,478
Origin of products sold in Europe, k units
USA 3,749
2,007
Asia 1,438 4 117 796
Number of plants this round
USA 12 12 21 12 17 13
Asia 24 10 19 15 7 5
Number of plants next round
Asia 24 10 19 15 7 5
Number of plants after next round
Asia 24 10 19 15 7 5
Cost report
Logistics
Average logistics cost per sold product, USD
Products sold in USA
4.24
12.85
Products sold in Asia
4.34
0.72
1.95
11.61
12.17
Products sold in Europe
28.41
29.59
29.01
29.60
26.11
Production cost per unit, USD
Tech 1
55.22
63.73
52.73
Tech 2 214
Tech 3
53.71
Tech 4
116
259
Tech 1
42.44
49.58
43.23
Tech 2
61.82
Tech 3
54.94
54.21
Tech 4
98.26
292
Contract manufacturing cost per unit, USD
Tech 1
88.57
Tech 2
98.41
94.60
Tech 3
75.27
Tech 4 139
Tech 1
98.37
Tech 2 128
Tech 3
91.50
Tech 4
129
Average unit cost per sold product, USD
Tech 1 55.22 88.57 63.73 52.73
Tech 2 61.82 115
Tech 3 75.27 53.71
Tech 4
120
Weighted average
63.69
104
Tech 1
47.37
58.18
50.86
Tech 2 61.82 146 94.60
Tech 3 54.94 91.50 54.21
Tech 4 108 277
Weighted average
57.25
60.48
74.55
69.11
78.57
Europe
Tech 1 55.22 98.37 63.73 52.73
Tech 3
75.32
Weighted average 104
68.99
113
Production scrap, %
Tech 1 1.24
1.32
1.29
Tech 2
2.13
Tech 3
1.39
Tech 4 1.39
1.49
2.20
Tech 1
1.76
1.96
1.90
Tech 2
1.71
Tech 3 2.13
2.16
Tech 4
2.40
4.65
4.56
Logistics details
Tech 1, k units
USA Production 3,849 0 2,942 4,852
Contract manufacturing 0 1,000 0 0
Imported from Asia
Total products
Sales in USA
-1,202
-23.06
-458
-394
Exported to Asia
-2,014
–
2,298
–
4,346
Exported to Europe
-634
-186
-112
Cut production
2,751
5,775
2,827
153
Unsatisfied demand
Production 3,208 0 1,482 1,066
Contract manufacturing 0 850 0 0
Imported from USA
Total products 5,221 850 3,781 5,412
Sales in Asia
-5,221
-664
-3,781
-5,412
Exported to USA
Exported to Europe 0
-117
Cut production
2,292
5,225
1,425
33.72
Europe Imported from USA 634 0 186 112
Imported from Asia 0 117 0 0
Total products 634 117 186 112
Sales in Europe
Tech 2, k units
USA Production 0 143 0
Contract manufacturing 0 850 1,953
Imported from Asia 1,433 0 0
Total products 1,433 993 1,953
Sales in USA
-1,433
-180
Exported to Asia 0
–
84.16
-1,621
Exported to Europe 0
-730
Cut production 0
5,632
1,169
Unsatisfied demand
1,129
Production 6,336 130 0
Contract manufacturing 0 1,000 0
Imported from USA 0 84.16 1,621
Total products 6,336 1,214 1,621
Sales in Asia
-3,465
-1,214
Exported to USA -1,433 0 0
Exported to Europe
-1,438
Cut production 0
5,095
Unsatisfied demand 0 0 0
Imported from USA 0 730 0
Imported from Asia 1,438 0 0
Total products 1,438 730 0
Sales in Europe -1,438 -730 0
Tech 3, k units
USA Production 0 0 858
Contract manufacturing 0 2,267 0
Imported from Asia 0 0 0
Total products 0 2,267 858
Sales in USA 0
-879
-858
Exported to Asia 0 0 0
Exported to Europe 0
–
1,373
Cut production 0 0 0
Unsatisfied demand 0 0 168
Production 6,864 0 5,610
Contract manufacturing 0 2,213 0
Imported from USA 0 0 0
Total products 6,864 2,213 5,610
Sales in Asia
-6,864
-2,209
-5,610
Exported to USA 0 0 0
Exported to Europe 0
–
4.12
Unsatisfied demand
718
4,213
Imported from USA 0 1,373 0
Imported from Asia 0 4.12 0
Total products 0 1,377 0
Sales in Europe 0
-1,377
Unsatisfied demand 0 0 1,388
Tech 4, k units
USA Production 6,158 4,506 0 642
Contract manufacturing 1,562 0 0 0
Imported from Asia 0 0 1,864 0
Total products
7,720
Sales in USA
-3,972
-1,843
-1,864
-262
Exported to Asia 0
-1,105
-345
Exported to Europe
-3,749
-1,558
–
35.51
Cut production
442
Unsatisfied demand 0 0 0 0
Production 0 2,341 591 412
Contract manufacturing 0 0 2,069 0
Imported from USA 0 1,105 0 345
Total products 0 3,446
2,660
Sales in Asia 0
-3,446
-757
Exported to USA 0 0 -1,864 0
Exported to Europe 0 0
-796
Cut production 0 299
352
Europe Imported from USA 3,749 1,558 0 35.51
Imported from Asia 0 0 796 0
Total products 3,749 1,558 796 35.51
Sales in Europe -3,749 -1,558 -796
-35.51
Cost report – Transportation cost incl. tariffs per sold product, USD
USA Tech 1 0 0 0 0
Tech 2 16 0
Tech 3 0 0
Tech 4 0 0 16 0
Tech 1
6.17
9.73
Tech 2 0 1.11 16
Tech 3 0 0 0
Tech 4
5.13
7.30
Tech 1 29.60
25.30
Tech 2 25.30 29.60
Tech 3 29.59
Tech 4 29.60 29.60 25.30 29.60
Letter to Shareholders
Company Overview
Review of Financial Performance
Profit Margin
Asset Turnover
Equity Multiplier
DuPont’s ROE
Letter to Shareholders
Company Overview
Review of Financial Performance
Profit Margin
Asset Turnover
Equity Multiplier
DuPont’s ROE
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