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VICA - Enjoy the difference Company - Essay Example

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This essay shall focus on the VICA - “Enjoy the difference” Company. This company has had massive praise on its ability to maintain its name in the European as a car manufacturing corporation. Over the years, the corporation has endeavored to produce high quality cars with high technology. …
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VICA - Enjoy the difference Company
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? Business game al affiliation Business game Introduction This essay shall focus on the VICA - “Enjoy the difference” Company. This company has had massive praise on its ability to maintain its name in the European as a car manufacturing corporation. Over the years, the corporation has endeavored to produce high quality cars with high technology. The company has also managed to remain stable in the European competitive market. In order to fit in the market, the company made an initiative of assessing the target customers, with the aim of acquiring maximum profits from the business initiative. At the commencement of the project, our team embarked on a mission to maximize the company’s profits by weighing the shareholders investment in the company. At the end of round 4, our group had managed to acquire about four percent of the market share inclusive of the City and Large car. This company is keen to check the profit and losses incurred by the company. Focus on the workers’ demands is among the company’s major concerns, to develop a rapport between the management and the workers as well as, keep the company on its toes. The target group of the company’s City car falls below 25years while the Large car is persons between the ages of 41-55years. On the part of the City car the vehicle is suitable for short distances, and is affordable for the youngsters. On the other hand, the large car is suitable for the old people who require carrying luggage of varying sizes and moving over long distances. The Forecast for Round 1can be summarized in the table below. The table is inclusive of sales, profits and balance. The Forecast for City car stood at 53300b while that of the large car, 40950. CASH FLOW FORECAST Cash In Cash Out Opening Bank Balance ?500,000,000.00 Sales Income ?1,628,805,750.00 Total Material Cost ?1,211,774,167.50 Total Labor Cost ?47,000,000.00 Total Overheads ?242,508,062.56 Factory Cost ?650,000,000.00 Automation Expenditure ?17,500,000.00 Tax Payment ?38,392,055.98 Net Interest Payment ?0.00 Bank Balance before Loan -?77,918,536.04 Loan Requested ?200,000,000.001 Closing Bank Balance ?122,081,463.96 Company’s performance Our case study’s company- VICA - “Enjoy the difference” Company made various approaches and forecasts in several rounds. This part shall scrutinize each round in an attempt to focus on the forecasts. Round one In the first round, our group selected the City car and the Large car to be a man product. We found out the City car to be of low price, high volumes and makes the most profit. Our group attempted to categorize the different characteristics of the target market. In terms of the City and large cars, our group put in focus attributes of comfort, safety, speed, technology and style of the car. The reasons behind the selection of these attributes is that is the age group under the age of 25 years are more concerned with safety, style and technology of the make of the car. Contrary, the age group between 41- 55 years prefer a car that is comfortable, has a sense of style and high technology. In Round 1, the market share was designed in such a way that, it would target 1% of the City and Large cars. However, it proved extremely tasking to fit in the new market, with the competition posed by the gurus. The Company embarked on a mission to produce Citizen-the City car and Lugano- Large car. The two makes of vehicles incorporate a large percentage of the market share that contributes greatly to Round 4. In this round, there indicated a great deal of drop in the market share of the Citizen to 0.95% and Lugano, 1.39%. By the end of the first year, the Citizens cars stood at 53,300 while Lugano’s was 40,950. The gross margin was 14.52% and 27.46% for Citizen and Lugano respectively. The drop indicated after the first round stood at 9.09% and 1.59% correspondingly. The reason behind this occurrence is the fact that, the number of vehicles selected by the target groups was slightly higher than what had been budgeted for in the earlier budget. In the group work, it escaped our concern that, the deprecation needs to be highlighted that led to the decline in the gross margin. However, all the cars managed to be sold after round 1, though we also forgot to attach the warranty sheets due to ignorance on its allocation. At the end of the budget, that error cost us ?26.92m. In terms of automation, the number used for Citizen and Lugano are 10 and 25 respectively. The laborers in the company were 1200 for Citizen and 1800 for Lugano. The productivity of Citizen was rated at 45 wile Lugano’s 52. Citizen’s labor was ?529.08 and Lugano’s ?459.10 calculated in the course of round 1.In total, the labor added up to ?47m - ?28.2m for Citizen and ?18.8m for Large cars. The cost of materials was 7,280 for Citizen and 13,100 for Lugano, designs cost for City cars stood ?600 per car and engines, ?280 per car. Adding up the total costs of the design and options of the cars, ?2945 per car was recorded. From the reports, therefore, about half of the options were taken by clients. In the group work, the estimate of costs was rated at 30%. The total costs of material for the Citizen car was ?9043.50, inclusive of design cots, designs and raw materials. In this context, therefore, Lugano was recorded to have more options in the market as had its target group was seen to recorded more sales. Its design included (?990) - 6-8 cylinder engines, and engine size of (?924). Lugano’s cost per car in terms of designs and options added up to ?9,355 per car, while 47% of the clients made a decision to customers. The decisions made by the clients stood at ?7206. According to our estimate, the option s made by the clients, in relation to the operation forecast was 30%. The total cost of material was ?17,820.65 inclusive of options, designs and raw materials. The total income of the sales made for the cars included ?1,628.8m (?596.9mCitizen and ?1,031.9m for large cars). An increase in the fixed overheads is a clear indication of a total contrast of what had been calculated in round one. In response, the total gross amount of the forecast was slightly altered form the planned figure of ?370m. The resultant profit stood at ?235m after round 1. The amount invested in Research and Development had a difference of (?48.7m) and the decisions (?96.5m) due to a misunderstanding on the placement of figures in the course of the report. In the promotions, the amount of money invested included ? 65m, but after the operation, the cost was cut down to ?55m after the decisions were made. In total, the sales added up to ?1,628m, an inclusion of manufacturing materials as well as the manual labor in the financial year. The costs of training were ?0.94m, while after exclusion of overheads in the profit and loss accounts; the loss of ?146.5m pounds was recorded. There were no unsold car stocks, debtors and creditors were not accounted for during the group. The balance sheet of the round 1, was totally disintegrated as the total amount of lent from the bank would have been more. In the group work, we ended up recording an incorrect figure. The bank balance, devoid of loan, was indicated to be of -?254.5m. The Market Share and Gross Margin can be summarized below Summary of Citizen and Lugano operation costs City Car-Citizen Large Car-Lugano Total Workers employed 1200 800 2000 Units of automation 10 25 35 Weekly wage ?470 ?470 Raw material cost per car ?7,280 ?13,100 ?20,380 Design cost per car ?880 ?1,914 The graph below indicates the profits of the company in millions Round 2 After successful completion of round 1, our company had made enough sales, but did not manage to make any profits. From the results, our group decided to improve on the results by increasing the target production of cars, in order to assess the sales of the company will be productive. In the course of discussion, we settled at increasing the number of employees in the workplace, automation units, thus more production of the Large and City cars. We settled on boosting productivity of our employees by changing the amount of wages paid on a weekly basis. Since the population had adapted to the vehicles, the number of options of the City and Large cars was reduced to five options. From round 1, raw materials in this round decreased while the cost of unit productions increased. In the group, this decision was unanimously attained by virtue of the need to increase the number of employees in the company as well as, the units used for automation. City Car-Citizen Large Car-Lugano Total Workers employed 2000 2000 4000 Units of automation 40 20 60 Weekly wage ?500 ?500 Raw material cost per car ?7,401 ?13,317.92 ?20,718.92 Design cost per car ?894.64 ?1,945.84 Round 2 indicated more production of vehicles than round 1. The market share as well as, the gross margin recorded 1% and 14.53% for city car and 1% and 27.54% for the Large car. Nevertheless, the results of intended by our group was completely different from the one presented in our initial plan. The result of market share and gross margin, the number is 0.95% and 9.09% for the City car and 1.39% and 17.59% for the Large car. Market Share(City Car) Market Share(City Car) Gross Margin(Large Car) Gross Margin(Large Car) Result 0.95% 1.39% 9.09% 17.59% Forecast 1% 1% 14.53% 27.54% In terms of overheads, our company focuses more on research and development, mainly because the company may need to remain relevant in the future, as well as compete effectively in the market, against the established companies. From round 1data, it is evident that the total overheads are almost double; a factor that explains that sustainable development comes for in the company. On the other hand, our company could not sell all the Large cars; therefore, the Company lost a substantial amount of money. Overheads Income Cost Fixed Overheads ?222,968,297.19 Market Promotion ?80,000,000.00 Research & Development ?73,360,000.00 Training Cost ?4,800,000.00 Total Overheads ?411,458,297.19 Round 3 From results of round 2, our group believed that, the company could not only survive with production of more cars, in order, to increase profits. In this round, the company aimed to pay more attention to inflation forecast as a way of increasing its profits. Our group, in this round, aimed at producing new cars, a luxury car. In this round, this group kept all the employee, but increased the units of automation produced by each member. Our group decided on this move as the company did not require spending more on building another manufacturing company for employees. City Car-Citizen Large Car-Lugano Luxury Car-Discover Workers employed 1800 700 2000 Units of automation 40 20 10 Weekly wage ?520 ?520 ?520 Raw material cost per car ?7,612.69 ?13,698.66 ?27,711.02 Design cost per car ?920.22 ?2,001.47 ?4,300.43 In this round, our group decided to pay attention to the luxury car as this car would allow the company acquire huge amounts of profits. In this round, our company chose 21 options for the luxury car. In real sense the total price of the luxury car added up to ?90,840. On the other hand, the company embarked on changing its target population, who would purchase the luxury car. The luxury car would target the age group 41 to 55 years. To fit the targeted population, the company selected choices of safety, comfort and high technology that had to be modified. In the context of sustainable development, the company found it necessary to work more on research and development of the company. In the course of focusing on research, the company also kept in mind the issues that were heighted in round 2. The company also attempted to increase market promotion of the company, so as the target population would associate themselves with the new brand. Overheads Income Cost Fixed Overheads ?190,605,618.01 Market Promotion ?100,000,000.00 Research & Development ?27,980,000.00 Training Cost ?4,992,000.00 Total Overheads ?403,907,618.01 In the third round, the company focused much more inflation forecast and the units of production by the employees. The same amount of production of the City car remained constant. For the luxury car, the number of production moved from 200 to 1300.The reason behind the production of the luxury car is that, it had the ability of ensuring that the company would acquire as much profit as possible. In this group, the market share and gross margin was to be 1.50% and 14.58% for city car and 1.80% and 27.54% for large car. Just like in the other rounds, the data presented in this round turned out totally different for the forecast planned earlier. The market share and gross margin were concluded to be 1.55% and 11.03% and 2.14% and 21.73% for large car. The results can be summarized as; Market Share(City Car) Market Share(City Car) Gross Margin(Large Car) Gross Margin(Large Car) Result 1.55% 2.14% 11.03% 21.73% Forecast 1.50% 1.80% 14.58% 27.54% Luckily, the company was able to sell all the city and large cars. After round 3, our company acquired a lot of profits form the sale of the luxury car. As a result, our company cumulated ?200,000,000 loan that allowed the company pay its debts, ultimately acquire a positive bank balance. Round 4 From round 3s results, our group discerned the gaps that took shape in the sale of stocks. A total of 2403 cars ended up being unsold. One of the major aims of round four was to ensure that, all the remaining stocks of round three are sold, with the aim of gaining profits in the company. In order to complete the sales of the vehicles were adjusted. Citizen’s selling price was increased to ?12,239, while that of Lugano at ?27,539 and Discover’s ?94,509 due to 4% market price rise of as well as, gain as much profits as possible. Production targets also changed to 94,300, 54,600 and 8,500 for the three makes of cars, respectively. With time, the productivity target was changed to 49.6, 45.5 and 9.5 respectively for Citizen, Lugano and Discover. All these modifications aimed at ensuring that the company is in a position to acquire as much profits as possible. Our group also considered the ability of the Company to fit in the market for a while without diminishing. However, inflation rates led us to the drawing board, thus the 2%, 2.3% and 1.8% data on market share of the three vehicles respectively. On the other hand, the wage of the employees increased with a ?50 margin to stand at ?550 while the gross margin remained constant, and promotion costs remained ?100m. Research and development became alienated from the picture due to the failure of certain projects. Conclusively, round 4 saw successful sale of vehicles meet the targets set by the company. All the cars produce during the year were sold, thus the company attained its market share. In this case, the gross margin completely differed and settled at 9.24%, 19.85%, and 38.19% respectively for the three cars. On another angle, market share settled at 1.98%, 2.22% and 1.88%, also different from the set targets. Out of the customers 63% of the clients preferred Citizen, 66% of Discover and 59% of Lugano. The sales forecast concurred with the result; the gross profit settled at ?806m unlike the ?1016m that was previously set. Due to the failure of quite a number of projects and failure to mature of some, value of some Research and Development projects changed. The forecast indicated ?29m, while the results stood at ?20m. In total, the operating profit forecasted ?521m, while the result showed ?316m. The post tax profit was ?333m and the result showed ?236m. At the end of the forecast, the bank balance devoid of loans was, ?386m and the result set was ?219m. Market Share and Gross Margin Profit in Millions Learning From all the departments, ranging from Finance to Human Resource Management, decision making issues constantly affected the workability of the plan initiated by the organization’s members. According to (BERG, n.d.) and Ward (2000), financial statements cannot be alienated form the success of an organization. The cash flows and outflows play a major role in the unbeaten operation of the business. In this case of this case study, the cash flows were beneficial in terms of comparing data of the targeted production and the number of units of automation. Through the cash flow, it became extremely easy to compare data from various rounds in the organization’s operation. The cash flow data enabled our group edit the data presented on the City car, Luxury and Large car. The financial statements aid in the interpretation and analysis of the cash flows. Through the profit, and loss accounts, the group was in a better position to understand the revenues generated; thus, detect the fluctuations of wealth in the financial era. According to Davies (n.d.), financial statements enable an organization calculate all forms of calculations that may be required to successfully complete their financial statements. In this case, once the data was entered in the profit and loss accounts and gross profits computed, the data was transferred to the balance sheet for an analysis of liquidity and solidarity of the company. The balance sheet was beneficial in terms of analysis of the company’s spending in terms of revenues and capital. Generally, the cash flows made it easier for our group to analyze the amount of cash that is left and how the organization can maximize on the amount of money left to maximize sales. During the group work, it escaped us that ratio analysis would assist in coming up with accurate decisions. In terms of marketing, the module focused mostly on the pricing strategy. The most imperative factor that can be considered in this context is coming up with the right price in the market mix. Getting the right price is vital for the success of the business, in that the company is able to ascertain the success of the company through pricing. However, the pricing of the cars proved to be an uphill task since factors like competition, costs and marketing had to be incorporated in the analysis. Jobber,( n.d.) indicates that, it is important, that marketing analysis is important if the company had to fit in the competitive European market. The first rounds of the organizations did not entail price inflations of the car prices. The company incurred huge amounts of losses in relation to this error committed. Contrary to other groups, our group incorporated high price segments as the customers had the ability to meet the demands of the products produced. The unsold stocks were later to be sold in the subsequent rounds, but with a totally different approach. Our group focused too much on other areas, thus neglected the competition and market research that cost the company a lot especially in terms of sales. The operations module focused mostly on product flow in process selection. In the manufacturing sector, the product flow concurred with material flow that composed the final products-cars (Schroeder, n.d.). the manufacturing sector operated on the basis of the target market, volume of output, number of skilled laborers, and quality of produce. All these were able to aimed at ensuring the company acquires enough profits. These processes also ensure that, the customers acquire the best forms of products, and deliver the best to the clients. The Human Resouce Mangement , on the other hand, focussed on planning the entire organization’s processes. Bloisi, (n.d.) argues that, the human resource plays the role of ensuring that the organization’s strategies are attained in the organizations. Planning has been credited with its ability to attain organizational objectives. A lot of money has been shifted on wages and labor of the employees. All these investments had to be made useful on the organization through, the sale of cars and resell the remainders of the various rounds. Conclusively, the business game can be justified to argue on how businesses are run in the actuality. Previously, our company faced massive challenges in terms of profit acquisition. Poor decision making and wrong computation of data contributed a great percentage of the entire losses incurred in the company. Unsold stocks were another major challenge facing the company. This factor led to constant reforms in the purposes of the company, so as to keep the company running and tackle its competitors. In turn, we had to keep changing the strategies for implementation of the company’s objectives that would match the market strategies, and in the long run acquire huge sums profits as possible. References BERG, n.d. Financial Statement Analysis. Bloisi, n.d. An Introduction to Human Resource Planning. McGraw-Hill Companies,2006. Davies, B., n.d. Business Accounting and Finance Second Edition. McGraw-Hill. Jobber, n.d. Principles and Practice of Marketing ,Fifth Edtion. McGraw-hill. Schroeder, n.d. Operations Management: Contempory Concept and Cases, Fourth Edition. McGraw-Hill. Ward, S. (2000) Cash Flow Analysis. Available at: http://sbinfocanada.about.com/cs/management/g/cashflowanal.htm (Accessed: August 2000) Read More
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