Sandeep Industries Inc. Simulation Analysis Report

Simulation Game Analysed

The report has been prepared for the Sandeep Industries Inc which is the startup company and has been facing the competition from the other new start ups and as well as the incumbent competitors. The competition has led the company to work more and more effectively and efficiently so as to survive in the market with good and better condition. Throughout the report, the management accounting technique namely simulation has been followed. According to this technique, various inputs are punched at various stages in the given data according to the needs of the circumstances and facts and then the results are analysed in an efficient and effective manner. In this report, the simulation game will be played for twenty rounds in which various changes are made in the financial data through input of various financial figures and changes. These inputs will give different outputs and on the basis of that output the next round will be played so as to have the better and fine results. The twenty rounds means data has been simulated for five consecutive years and the performance thereon has been analysed and detailed. Performance has been evaluated on the basis of the increase in sales, net profit, inflow of cash and other non financial measures like increase in employment turnover rate or difficulty in filling the vacancy of the requisite position in the company.

At first, the game has been played and the comparison has been made for each decision with regard to the respective results. Secondly, the contribution of the decision towards the achievement of the common goal of the company has been detailed. Then the strategy has been detailed as to how the ineffective areas can be dealt with. And lastly the report has been ended up with the conclusion of the report and the recommendation thereon.

Sandeep Industries Inc. is a startup company and has stepped into the market with the cash balance of dollar one million and will the resources personnel as engineers three and sales and marketing two (Evanno, G.2005).

In the first round, with the sales price per unit of dollar seventy five thousand, the company has been able to generate the loss of dollar 162500. At this time the news was that the company is the startup company and has been looking for more sales personnel along with that the company is in the urgent needs of the funds to the tune of $796500. By having the look over this fact, in the second round, amount of $200000 has been requested from the Venture capitalists. In the whole round it has been pending and the loss has come down to $161864 with the available cash balance of $910900. In the third round, news update has come stating that the company has applied for $200000 from venture capitalists and is pending for approval. After sometime, it has been approved with one condition stating that the venture capitalists required the stake of 5.1% in the share holding of the company. Having due consideration and the needs of the business, the offer has been accepted and the funds have been obtained and utilized in the expansion of the business and the loss has come down to $160400. In the fourth round, the news update has come where the company has declared that the company has been able to acquire the first customer and has been able to sell the first unit of the product of the company and thus has been able to generate the sale of $75000 with the net loss of $152343. The cumulative loss of the company as on the year end after completing the four rounds is $474607 as against the cumulative loss generated by other startup competitors is $691697. In order to give benefit to the employees so as to retain them, the company has decided in the next round to give 80% as salary, 10% as stocks and 10% as stock options. This is the breakup of their salary composition and has given the advertisement for vacancy of two more sales personnel so as to advertise the product in the market. With this, the sale has not been increased but the loss has been decreased to $138770. The company has here compared the results with that of the other start up competitors and has seen that these startups have selling price in the range of 72000 to 73000 dollar per unit. Therefore, in the next quarter round, the company has decreased the selling price per unit to $74850 and due to which the company has been able to achieve the sale of $299589 and thereby the net loss of the company has decreased to $113050. In the next quarter round the company has decreased the sale price per unit to $74700 with additional two sales and marketing personnel and has been able to achieve the sales of $448323 and has declared the decreased loss of $90754 (Law, 2010). At the last round of this year, the company has kept the selling price per unit as the same with additional sales and engineer personnel by one each. By having this, the company has been able to achieve the net sales of $896400 and the net loss is now $6799 and the cumulative loss as on date is the $823980 as against the cumulative loss of the incumbent competitors amounting to $1430934. The company in the next round of the coming year has reduced the selling price per unit by $50 and thereby the company has recorded the sales of $1343805 and in the next quarter round the news update has come stating that the company has recorded its one million sale and the economy has grown by 4.5% as compared to last quarter and secondly the major highlight has come regarding the confidence of the consumer that the company has gained over the past two years. In the next round, then the company has again dropped the selling price per unit by $50 and thus sales have been increased to $1790539 and thereby the profit has been $213712.

Decisions Considered

In order to give the benefits to the employees, the company has decided to change the composition of the sales from 80% as salary, 10% as stocks and 10% as stock options to 90%, 4%, 4% respectively and additional 2% as the share of profit. Due to which the new sales personnel have joined the organization and the company has declared that the company has employed its first eleventh employee. In the last round of this year, the company has requested for Initial Public Offering for $200000 and the same has been kept pending for the next two quarter for the approval from the SEC. At the end of this quarter round the company has declared that the company has acquired its hundredth customer and it exhibits that the company has been able to achieve better in the market as the company has now the cumulative profit of $2266058 as compared to the other start up competitors which is $2184842 (Railsback, 2006).               

 In the four rounds of the last year, the company has decreased the price per unit from $72500 to $69200 against the selling price of other startups as $66186 and at the last has been able to achieve the sale of $9637746 and profit of $1829173.

The above shows that the company has been able to achieve its financial objectives at par with the market conditions.

As per the simulation game, following are the decision which has been considered through the twenty rounds comprising of the five years. These are given below:

• Selling price of product
• Cost price of product
• Composition of the salary of the employees
• New Personnel employed in the company
• Cash flows of the Company
• Share Price of the company

Each of the decision has played its own role. In the first year as the company is in needs of the funds and have applied for venture capital fund and even have agreed to give the stake of 5.1% which has led the company to start the business. In the second year the company focus was to increase the sales and thus has decreased the selling price per unit due to which the company has been able to generate the sales of $1 million which has been declared by the company in media also. In the third year, the company has focused mainly on the employees keeping the selling per unit at the equivalent approximate level. By changing the proportion of the salary of the employee, new employees have been employed by the company in both sales and engineering staff (Johnson, 2009). In this year the cash flows of the company has been in increasing trend and has intended to move for the Initial Public Offering and thus at the end of this year the company has sought the IPO of $200000. The IPO has been approved in the next year due to which the share price of the company has been increased to $205.80 and which has led the investors to invest in the company and from there the cash flows have been increased and at the end of the year the company has been able to generate the cash flows of $3300000. In the last year, the company has in contrast to the other competitors have decreased the selling price per unit due to which the sales have been increased and thereby the profit and also the cash flows have been achieved at $8100000.

The one major unsuccessful area that has come across during the simulation is that from the starting of the fourth year, the news update has come stating that the employees of the company are not satisfied with the working hours and the conditions of the company due to which the employees have been looking for the new organization to work. New update was also there stating that the company has finding it difficult to fill the vacancy in the engineer department and consequently in the sales and marketing personnel department (Luke, 2005).

As the human resources is the backbone for the success of any organization and hence in order to overcome this difficulty, following strategy shall be formulated:

• The bonus plan shall be included in the cost to the company of the employees.
• The Working hours of the employees shall be managed properly. It should be clearly defined.
• The employees shall be motivated through both monetary as well as non monetary factors.
• Referral scheme shall be adopted wherein the existing employee will receive the compensation if it brings new employee in the organization (Graham,2012).

Conclusion

The Sandeep Industries Inc is the startup and has been growing since its inception over the five years. The company has taken so many decisions whether it is related to the decrease in selling price per unit or it is related to increase in the number of employees or it is related to the seeking of funds from the venture capitalists or it is related to go for the initial public offering. The major problem that the company has faced is of the employee retention as the learning curve that the company has been able to develop was only because of those employees

Thus, it is recommended that the company shall adopt the strategy so as to retain the old employees and attract new employees.

References

Evanno, G.,(2005), “Detecting the number of clusters of individuals using the software STRUCTURE: a simulation study”. Molecular ecology, 14(8), pp.2611-2620

Graham, M.E., (2012), “Stock-related rewards, social identity, and the attraction and retention of employees in entrepreneurial SMEs”. In Managing People in Entrepreneurial Organiztions (pp. 107-145). Emerald Group Publishing Limited.

Johnson, B., (2009), “The role of adaptive management as an operational approach for resource management agencies” Conservation ecology, 3(2)

Law, A.M., (2010), “Simulation modeling and analysis” (Vol. 2). New York: McGraw-Hill.

Luke, S., (2005), “Mason: A multiagent simulation environment”. Simulation, 81(7), pp.517-527

Railsback, S.F., (2006), “Agent-based simulation platforms: Review and development recommendations”. Simulation, 82(9), pp.609-623