Situation Analysis

Industry: Competitors Analysis

Our company has two main competitors: Green and red, each of them have their success
and failures which has affected their performance and the performance of our company.
Green Company
Starting with the Green company, they were last in the market in terms of sales revenue.
They invested mainly in tech 1 and tech 2 and 3, where they produced tech 1 in-house in the USA,
and used contract manufacturing for tech 2 in Asia and tech 3 in the USA. Additionally, their
product share in the market is 34.26%.
the success of the Green company is that they managed to reduce their variable production
costs, which is the lowest in all three companies, which in turn increased their operating profits,
however their profit is still negative indicating loss.
Another success for the green company was that they were the highest performing in Asia
due to high sales revenue and low costs. Also, they have made high income from internal transfers.
The low operating costs could be because they ran their production using contact manufacturing.
The green company was also successful in they had the highest average trading price, which is the
price of additional shares issues at round 6.
On the other hand, Green Company had many failures, namely it had the lowest sales
revenue globally. Their sales revenue was the lowest in the USA compared to the market although
their production of Tech 1 was the highest, and they 100% of their capacity in the US.
Another failure is that their production cost per unit was high in the US for in house production. It
was also high in the USA for tech 3, and Asia for tech 2.
In addition, their investment in R&D isn’t as high as the other company which affected
their market positioning and technology produced.
Red Company
The Red Company was a strong competitor, a major success of them is their high
investment in R&D, which has helped them increase their product development and technology
development. Another success is that they had the highest market share globally at 36.32%.
Additionally, their market share in Tech 2 is 51%, which is another success.
As for their failures, their biggest failure is their high operation costs, which made them achieve
the lowest profit between all the competitors despite their high market share. Another failure is
that they have the lowest share price in the market at 75.8, which indicate that it’s less reliable than
other stocks.

Competition Summary:
Company Successes Failures
Green  Their product share in the  the lowest sales revenue globally.
market is 34.26%.  Their sales revenue was the
 They managed to reduce their lowest in the USA.
variable production costs,  their investment in R&D isn’t as
which is the lowest in all three high as the other company.
companies.  Their market capitalization was
 They were the highest the lowest at $2.4M.
performing in Asia.
 They had the highest average
trading price

Red  Their high investment in  High operation costs

R&D.  Lowest profit at -345,147 for
 They had the highest market round 6.
share globally at 36.32%.  The lowest share price in the
 Their market share in Tech 2 is market at 75.8
51%  Lowest Capacity Utilization at
 They build production plants 89% in the USA.
in the USA (12) and Asia (1).
Company Performance
Blue Mobile Inc performance have fluctuated over the years, but recently It has managed
to become the highest sales revenue, and the highest profit as seen in the following Fig.1.

Sales Revenue
2,500,000

2,000,000

1,500,000

1,000,000

500,000

0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Green Red Blue 1

The first year, our sales revenue was the lowest at $1,143,693, but in the following years
we started to gain more revenue than our competitors. In Year 2, our sales revenue climbed up to
be $1,313,392, and $1,577,357 in year 3, which was the highest in the market. The reason for this
increase is because we increased our investment in R&D as it was $352,500 in year 2, this has
helped us enhance the technology provided to our clients. Also, we increased our investment in
promotion, which reached $79,800 in year 3 compared to $32,000 in year 1, which is more than
double. This helped us gain more global and customer awareness and increased the sales of our
products.
Furthermore, our sales revenue continued to climb up and stay at the top of the market
throughout year 4, 5, and 6. Although our sales revenue was low at year 4 at $1,340,626, which
could be due to the low investment in R&D in round 3, however seeing these numbers, we
increased our investment in R&D to be $600,000 in year 4, which led to high sales revenue in year
5, and same for year 6.
 Profit
400,000

200,000

0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

-200,000

-400,000

-600,000

-800,000

Green Red Blue 2 per. Mov. Avg. (Blue )

Our profit was positive in year one, it was $32,756 which is good and wasn’t either the
lowest or the highest in the market. However, in year 2, our profit was negative meaning that we
suffered a loss in our profit, which was due to high expenses and costs, especially R&D, as we
invested $352,500 in R&D in that, which affected our net profit. As for year 3, we managed to
decrease our net loss, which was done by reducing our investment in R&D to $70,000, this has
helped decrease our net loss from $-218,945 to -89,586. This trend didn’t continue to year 4, as
our net loss increased to -680,802, this was caused by the high investment in R&D as it reached
$600,000, additionally our sales revenue was lower in round 4 that it was in round 3, which also
affected the net profit. However, we expected that this will change at round 5, since the aim of
high investment in R&D is to enhance the features of the technology provided which will increase
number of clients we have. This goal was achieved in round 5, as we managed to increase our sales
revenue, and net profit by not investing in R&D at all. Nevertheless, we increased our investment
in promotion slightly to $88,600. This has helped in decreased the net loss to $-88,600. At year 6,
we increased the investment in R&D to be $110,000, and investment in promotion to $95,700.
Which in turn affected our net loss to be $-80611. Additionally, our distribution of promotion
budget was almost equal between the three markets, with slight changes. For example, in year 6,
our investment in promotion in the USA was $25,900, and $41,700 for Asia, and $28,100 for
Europe.

Global Market Share

45.00

40.00

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Green Red Blue

The above bar graph displayed the percentage of global market share per company each
year. The market is divided almost equally between the three companies. In the first two years we
had the lowest market share at 28.43%, and 30.56% correspondingly which was due to the low
investment in promotion, hence there was not much market awareness about our products and
technologies. However, after the high investment in promotion in year 3 by $79,800, we managed
to gain the highest market share in the market by 35.65%, which is the highest percentage we have
reached in all 6 years. unfortunately, this percentage has decreased in the following years, but still
remained adequate in the market due to investment in promotion and R&D. in year 6, our market
percentage was the lowest in the market for that year as it reached 29.43% since our investment in
promotion and R&D was the lowest in the previous round and was adequate this round.
 Global Market Share for year 6
Green Red Blue

30%
34%

36%

This pie graph shows the that our company had the lowest market share in year 6 at 30%,
hence we need to increase our investment in promotion and in R&D in order to be able to achieve
high market share in the coming years.

Inventory
600,000

500,000

400,000

300,000

200,000

100,000

0
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Green Red Blue

Our inventory fluctuated over the years but for most of the years we had the highest
inventories in the market. However, in year 3, we were able to reduce our inventory from 316,744
to 92,992 through investing in promotion, however in the following years, out inventory continued
to rise to reach 496,765 in year 6. This could be due to the high prices of our technology in the
market, as the price of our tech 4 in the USA was 250, and 218 for tech 2 compared to 210 by the
red company. Additionally, the price for tech 4 was 400 EUR, which is the highest price in Europe.
Financial Ratios
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Cumulative 2.96 -17.63 -10.99 -12.33 -11.86 -9.66
Shareholder
Return %
Earnings Per Share 1.09 -7.3 -2.99 -22.69 -0.31 -2.69
Debt/Equity Ratio 0.799 2.06 1.556 -2.1 -3.19 -3.4

Cumulative Total Shareholders return

The cumulative total shareholder return measures the performance of the company’s shares
over time. It works by combining the total share price appreciating and dividends paid in order to
show the total return to the shareholder (investopedia, 2018). Based on the data presented in the
above table, at the first year, the ratio was low but it was good, from year 2 to year 6, the ratio is
negative, which indicates a red flag and means that the company performance is bad and the
stakeholders investment will lose its value over time. However it enhanced slightly in year 6, but
not enough, and the company needs to enhance their performance in increase investments.
Earnings Per share
The second ratio selected is Earning per share and is calculated by divided the net income
minus the preferred dividends by the weighted average shares outstanding. This ratio has
fluctuated over the years for our company. It dropped significantly in year four, but started to
increase in year 5, and in year 6 it was -2.69. this means that the values of our stocks will drop
over time if the ratio was not increased, because the earning per share is low, hence the
shareholders’ investment will drop. The company need to enhance their financial performance in
order to enhance this ratio.
Debt to Equity Ratio
This ratio is calculated by dividing the company’s total liabilities to the total stockholders’
equity. This ratio is used to measure the financial leverage that a company’s have. The ratio at the
first three years was good and indicated that the company will be able to pay their debt obligations.
However, in the last 3 years, the ratio became negative due to the negative equity value. This
means that the company is carrying losses. Hence the company is required to increase e their equity
from shareholders.

Current SWOT Analysis

Strength: Weaknesses:
 High Capacity Utilization in the USA  High production costs.
by 100%  Negative shareholders’ Equity in the
 Highest Profit in Global Market past 3 years.
 Increased market share globally by  No Market presence in Tech 1 and 3.
29.43%
 100% of global market share of tech 4.
Opportunities: Threats:
 Strongest company in Europe.  Strong competition
 Reduction in the short-term debt is  Strong Market presence and
possible. technology development of
 Addition of new technologies in the Competitors.
USA, Asia and Europe Markets  High market share of competitors in
global markets, which can increase.

Short Term objectives and strategies

Area Objective Strategies
Marketing Increase Market share by 10%  Increase promotions in
in the coming 5 years all markets.
 investment in new
technologies by
anticipating customer
needs and demands.
Production Decrease Inventory in all  Decrease prices to a
technologies by 2% yearly for competitive rate.
the coming 5 years  Minimize capacity

R&D Add new features to tech 4,  High investment in

and develop other techs, too inhouse development
 Investing in new
technologies

Finance Increase profit and sales to  Minimize production

enhance stockholders returns costs.
 Build a plant in Asia.