Simulation a Very Powerful Computer-Based Technique Has Research Paper

  • Length: 6 pages
  • Sources: 4
  • Subject: Business
  • Type: Research Paper
  • Paper: #83896999

Excerpt from Research Paper :

simulation, a very powerful computer-based technique has rapidly gained acceptance as a decision-making tool in business as well as industry (Wynn et al.,2007). The main uses of simulation in business processes are the improvement of operating as well as operational efficiency (Watkins & Hill,2009). The basic idea of the concept of simulation is to accurately model a given physical process on the computer screen by incorporating the various uncertainties that are somehow inherently present in all the real and actual systems. In this paper, we discuss how simulation can be used in judging the pricing as well as R & D. allocation of three different products (X5, X6, and X7) in an effort of formulating a better product marketing strategy that would see a company, Clipboard Tablet Co, make maximum profit from its sales operations. Our aim is to maximize the products' cumulative products over a five-year period. Also discussed is how Cost Volume Profit (CVP) and Profitability analysis can all be used in business in the improvement of operating as well as operational efficiency.

How the simulation process is conducted

The simulation process is carried out by first building a suitable model. The model is in this case built on Forio Simulate, a popular simulation software interface. The simulation is done in order to accurately simulate the effects of the actual sales process as well as to make clear any possible consequences that may affect the sales functions of the three product categories. The simulation may be done in a way that models the actual flow of individual product categories that the company deals on over an extensive period of time. The analysis may then make several virtual changes to the product variables in order to observe the effects without ever making actual changes to the real products or even manufacturing new products.

It is worth noting that simulation models can also be used in the analysis of the consequences of the alternative scenarios in the marketing and financial strategy of the said product strategies.

The use of simulation has therefore been indicated to have several benefits in actual industry since it can lead to great reduction in costs and increase in profits due to improved decision making processes. It is however important to note that despite the successes of simulation, the technique also has serious fundamental flaw. This is because simulation has an inherent inability to effectively evaluate the large range of possible options that are available. Simulation, Cost Volume Profit (CVP) and Profitability analysis can all be used in business in the improvement of operating as well as operational efficiency.

Cost Volume Profit (CVP) analysis

Cost Volume Profit (CVP) analysis is noted by Cafferky and Wentworth (2010) to be an important decision making tool for managers. CVP helps managers in understanding the connection between the cost and volume with organizational profits in mind.In our previous exercise, we contemplated going back in time and then coming up with the best choices regarding the manufacture of the three handheld devices- X5, X6 and X7. In this study, we use CVP analysis in guiding our decisions on the manufacture of the three product ranges.As Harngren, Datar and Foster (2006) noted, CVP analysis is important in the formulation of product strategy and policy. Our reliance of CVP analysis is based on the fact that it can help in the making of the right choices on our 3 product ranges since the year 2006.This is done without the need for concentrating on the beginning and end of each and every year's product performance levels.CVP as a decision making tool can be used in various ways. It can for instance be used in calculating the break even point as well as the special product price that would help the product to generate profits.In this situation however, our major concern is to achieve a berr performance of the products that the one achieved by one Mr. Joe Schmoe. Our strategy is therefore geared towards the building of a better strategy that can increase the bottom line. Our profit projection should be far much greater than the $954,830,241 which the corporation made between 2006 and 2009 under Mr. Joe Schmoe's leadership. Our strategy is aimed at helping the corporation bag over 100M in profits. This fete should be realized by following the profit distribution strategy over a four-year period as shown in the diagram below. This profit distribution strategy was arrived at after an in-depth examination of the profit that the firm made under Mr. Joe's leadership (In Time Wrap 1 and 2). A review of the outcomes of Time Wrap 1 indicates that X7 as a product requires a lot of efforts in the coming years since it is the future of the corporation's clientele. The R&D allocation for this product should therefore be doubled.Profitability ratio analysis is one of the most commonly used tools in financial analysis. This is because it can be used conclusively to determine a firm's bottom line as well as its return on investment. Measures of profitability are important to managers and investors who place their money in the company. As Bodie, Kane, & Marcus (2004) noted, the concept of profitability ration is used in measuring the ability of a company to generate earnings relative to assets, equity and sales.These ratio as used in the assessment of a company's ability to generate profits, earnings as well as cash flow relative to the anount of investment.The most widely applied profitability ratios are return on investmentt, netprofit margin as well as gross profit margin.These ratios are important since they indicate the level of a company's performance in activities related to profit generation. Groppelli and Ehsan (2000) noted that profitability analysis comprises of a core set of profitability/bottom-line ratios that are critical to the analysis of all investments.

A review of the products

In this section, a review of the product characteristics is carried out. Also included in this review are the product life cycles and how the products stack up in regard to price and performance. The products X5, X6, and X7 are all tablets. A review of the sales and performance parameter for the three products indicates a variation over the years. However, a cumulative consideration of these parameters indicates that X6 has the highest price index followed by X5 and then X7 comes last. Se Figure 1 below.


The performance of the three periodic also shows a periodic variation over the years. However, a cumulative outlook of the same indicates that the best performing products over the five-year period are X5 and X6 while the worst performing one is X7. This is indicated in Figure 2 below.

Financial review of the products



The sales of the table X5 would see a considerable variation over the years. The sales would continuously increase 968979 to 1647592 to 2145622 and then see a reduction to 1853177 and then 963776 followed by the lowest figure of 614026. This reduction in sales figures can be attributed to the change sin market saturation levels of the years. The costs, profitability, unit prices as well as unit margins follows the same pattern due to their direct link with sales function.



The sales of X6 will also see a continuous rise from the 2011 figure of 562961 to the highest figure of 2364061 in 2014 and then sharply reduce to 1118142.This too is attributed to the changing levels of market saturation for this particular product. The costs, profitability, unit prices as well as unit margins follows the same pattern due to their direct link with sales function.



The sales of X7 see a continuous steady rise from zero (2011) to 479827 (2015).This can be attributed to its futuristic design elements as well as a relatively low level of…

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