Maximizing Profits through Strategic Management

The report discusses the use of Cesim, a simulation game, to help students gain experience in real competitions among companies virtually. It also highlights the importance of developing business and strategic skills. Additionally, the report analyzes the internal and external stakeholders of IKEA, including creditors, employees, and customers, and concludes that the company prioritizes fulfilling stakeholder expectations. The financial performance of IKEA is also discussed, showing a steady increase in revenues year by year.

STRATEGY

Table of Contents
PART 1 – Cesim Global Challenge.................................................................................................1
Introduction............................................................................................................................1
The Mobile Phone Market......................................................................................................1
The Mobile Phone Industry....................................................................................................4
Competitive Advantage..........................................................................................................5
Outsourcing Manufacturing....................................................................................................8
Performance Improvement Recommendations....................................................................10
PART 2 – Stakeholder Summary...................................................................................................11
Stakeholder Analysis............................................................................................................11
Critical Evaluation................................................................................................................13
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

Illustration Index
Illustration 1: Market share in Asia.................................................................................................2
Illustration 2: Market Share in USA................................................................................................3
Illustration 3: Global sales revenue..................................................................................................4
Illustration 4: Profits earned on global platform..............................................................................5
Illustration 5: Global cost and expenses..........................................................................................7
Illustration 6: Profits earned in USA...............................................................................................8
Illustration 7: Profits earned in Asia................................................................................................9
Illustration 8: Stakeholder Analysis...............................................................................................13
Illustration 9: IKEA group's revenue.............................................................................................15
Index of Tables
Table 1: Own production cost..........................................................................................................9
Table 2: Installing number of plants in next round..........................................................................9

PART 1 – Cesim Global Challenge
Introduction
Cesim global challenge is a simulation game which has been formed to improve business
skills of the students. It helps to develop critical thinking and assists the individual to understand
global business operations of a chosen firm of preferred field. The individual get to take business
decisions, understand the competitive environment and apply the strategies. Success of the
company is assessed based on operational and financial indicators (Ameer and Othman, 2012).
Student can go through a range of concepts of management, such as, economic, political,
financial, human resources, procurement, production, research and innovation. It also helps the
student to take appropriate measures to earn maximum profits. Overall it is a digital game played
by various graduates, under graduates and business students for in house corporate training.
The Mobile Phone Market
The chosen companies in order to play simulation game are, Geeks tech, OUI Com, Real
tech, AJ Tech, Maxx Mobile, Ochre. The mentioned companies are the mobile phone companies
on which simulation have been applied. It has helped to draw their data based on their
functioning in all the 10 rounds played. The companies have competed with each other leading to
specific results at the end of the game. Maxx mobiles have been able to draw maximum sales
revenues that is 4,773,942 in comparison to the other companies which shows that it has used
good promotional and marketing tactics in order to promote its products. Maxx mobiles share
good brand image in front of the customers which has led the company to generate higher sales
revenues. On the other hand, sales revenue of Real Tech is 4,631,304, slightly lower from Maxx
mobiles but higher from all the other mobile phone companies.
Maxx mobiles have the highest global market share that is 23.21% which shows that the
company have maximum presence in comparison to other companies and earns the highest
revenues at global platform as well. External condition of global market are much more
favourable for Maxx mobiles. However, in USA, OUI Com have the highest market share that is
50.90%. It reveals that most of the customers purchase their mobile phones from OUI Com. The
company has high customer base in US. However, in Asia, Maxx mobiles have the highest
market share that is 29.62% and Real Tech is closer to Maxx mobiles which have market share
of 28.09%. Both the companies have higher profitability and shares positive impact of the
economic factors prevailing in Asia.
1

MAXX Mobiles have the highest market share in Asia, following with Real Tech and AJ Tech.
Most favourable conditions are enjoyed by the companies. High customer base, favourable
external market etc. External market include Political, Economical, Social, Technological, Legal
and environmental factors.
2
Geeks tech
OUI COM
Real tech
AJ Tech
MAXX MOBILES
Ochre
0
5
10
15
20
25
30
35
Market share in Asia
Illustration 1: Market share in Asia
Geeks tech
OUI COM
Real tech
AJ Tech
MAXX MOBILES
Ochre
0
10
20
30
40
50
60
Market Share in USA
Illustration 2: Market Share in USA

OUI Com have the highest market share in USA. However, none other company stands near to
OUI Com in terms of market share . Ochre have the lowest market share which shows that it is
required to improve its promotional and marketing tactics to expand in the country.
The Highest sales revenue is earned by Maxx mobiles globally, followed by Real Tech
and AJ Tech. It articulates favourable external market conditions for the companies. At global
platform, Ochre is required to use better techniques in order grow its sales.
3
Geeks tech
OUI COM
Real tech
AJ Tech
MAXX MOBILES
Ochre
0
1000000
2000000
3000000
4000000
5000000
6000000
Sales revenue (Global)
Illustration 3: Global sales revenue

The sales revenue of Maxx mobiles is highest but the profit is earned the highest by Real
tech at global platform. It shows that the profit percentage of each mobile handset sold by the
company is higher than that of Maxx mobiles. It also reveals that the cost and expenses of Maxx
mobiles is much higher in comparison to Real tech. The company is advised to reduce its costs in
order to earn higher return. The expenses can be on higher side because of the high cost of
material involved in production, high labour cost, high transportation and tariff cost, high
administration cost (Barnett and Salomon, 2012). The company can reduce these cost by drawing
a budget for optimum utilizing the available resources.
The Mobile Phone Industry
The mobile phone industry is ever-changing due to constant changes in technology taking
place in the environment. Technological up gradation compels the companies to use the latest
available technology in order to stay competitive in the mobile phone market. It requires
performing constant research and development to find and implement something new in the
existing mobile phones. The company invest higher or research and development department to
bring something new and attract the customers towards the company. It helps to develop brand
image and generate higher profits. Research and development team also helps to study the
market and find potential customers for their mobile phones (Cavusgil and et.al., 2014). It also
helps to take feedbacks from the customers and implement the changes suggested by the
4
geeks tech
OUI COM
Real tech
AJ Tech
MAXX MOBILES
Ochre
0
500000
1000000
1500000
2000000
2500000
Profits (Global)
Illustration 4: Profits earned on global platform

customers. The game involves six different companies of mobile phones. Some companies are
performing better in US market, some in Europe and Asian market. Various factors can affect the
sustainability in different geographical regions such as, high manufacturing cost involved when
the product is manufactured in USA. On the other hand, the cost and expenses of production is
on lower side in Asia due to cheap availability of labour in the countries. It is also important to
understand the market and take necessary steps for selling. Real tech is able to generate high
profits in Asian market, whereas, Max mobiles have been able to perform well in Europe market.
It also depends on the working conditions of the companies in every country. Maxx mobile may
be able to fulfil the needs of Europe market due to its product function and Real tech may be
providing mobile which are user friendly to the people of Asia.
Competitive Advantage
A mobile phone have to go through various steps before reaching to the end customers.
The cost includes researching about the new available technology, getting the material arranged
to produce the phone, promote the new manufactured product, transport it to end consumer etc.
The profit of a company is calculated by adding an appropriate profit percentage to all the cost
and expenses incurred by the company to deliver the phone to the end consumer. In case of a
company earning higher sales revenues doesn't mean that it is also earning higher profit. The
reason is that the cost incurred by the company can be on higher side than the profit percentage.
According to the given case, the cost and expenses incurred by the companies are different.
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The cost and expenses of Maxx mobiles are on higher side which shows that although the
company was able to earn higher sales revenue but the ultimate profit generation will be less.
The reason for high cost and expenses can be due to current economic factors prevailing in the
market. It includes, high tax slabs, high labour cost, high materiel cost etc. AJ Tech have also not
earned sales revenues in proportion to the cost and expenses it has incurred at global platform.
Comparatively, Real Tech have low cost and expenses in comparison to the sales revenue earned
by the company. It shows that the company is able to manage high profits by reducing its
manufacturing and selling cost of its mobile phones. The company is also earning high
percentage profits at the end of Round 10.
6
Geeks tech
OUI COM
Real tech
AJ Tech
MAXX MOBILES
Ochre
0
500000
1000000
1500000
2000000
2500000
Costs and expenses total
Illustration 5: Global cost and expenses

According to the profits earned by the mobile phone companies, the highest is earned by
OUI Com which shows that it have been able to experience most favourable conditions in terms
of expansion. The company was also able to earn higher sales revenues in Round 10. It also has
higher market share in USA, that is 50.90%. It reveals that entity is comfortable working in USA
and the external conditions of the market is in favour of OUI com. However, Ochre have not
been able to earn any profit, rather have to bear loss for 82362. The company also incurred high
cost and expenses while manufacturing mobile phones in USA. It shows that it has not able to
survive in US market. Also, it is advised that Ochre should not function in US or should adopt
better strategies to improve profits and decrease the cost involved in manufacturing and
marketing the product. The company is also required to understand the market and find out the
target customers in order to approach them directly rather than targeting the market as a whole
(Fagerholm and et.al., 2012).
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Geeks tech
OUI COM
Real tech
AJ Tech
MAXX MOBILES
Ochre
-200000
-100000
0
100000
200000
300000
400000
500000
600000
700000
Profits earned in USA
Illustration 6: Profits earned in USA

Every country have different marketing conditions, rules and regulation prevailing to sell
products. Also, the company who is able to understand the social and economical condition then
only it is able to survive in different geographical regions. Real tech have been able to generate
higher profits in Asian region which is due to low cost and expenses. The company also didn't
invest in research and development because it was already aware about the marketing condition
and demand prevailing in Asian countries. The cost of manufacturing is also low due to
availability of cheap labour in Asian region which ultimately reduces the cost of mobile phones
and company is able to generate higher profits. The company has also been able to earn higher
sales revenues in the end of Round 10.
Outsourcing Manufacturing
The companies are required to get their product manufactured or establish their own
factories to produce the product. The decision is based on the cost benefit that whether it is
feasible for the company to establish its own factory. For instance, if the company belongs to
USA and wants to expand to Asia. The company has two option first is to produce in the home
country and export it to the host country or establish factory and start production in the host
country as well. The verdict of the decision depends on the cost involved in producing the
8
Geeks tech
OUI COM
Real tech
AJ Tech
MAXX MOBILES
Ochre
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
Profit earned in Asia
Illustration 7: Profits earned in Asia

product in host country is less or more. The profits and availability of product also depend on
how far the production plant is available.
Based on the own production report provided for each of the available mobile phone
companies, they are using four different technology to produce the mobile phones. By using
Technology 1 OUI Com is producing in USA as well as in Asia but there is a vast difference of
cost between the two production costs. It incurred 3168 in USA in comparison to 1458 when the
production was done in Asia. In the same manner, Real tech incurred cost of 5610 when
production was performed in USA and incurred only 3850 when it was performed in Asia. In
case of AJ Tech cost of production USA is 5363 and cost of production incurred in Asia is 2695.
It shows that the cost of production is less in Asia rather than in USA. The difference is due to
cheap availability of labour in Asia and the workforce get ready to perform their task in less
money and deliver best services
Table 1: Own production cost
Mobile Phone company USA Asia
OUI COM 3168 1458
Real tech 5610 3850
AJ Tech 5363 2695
Maxx Mobiles 5535 2965
There is a vast difference in production cost involved in USA in comparison to that of
Asia.However, the availability of plant for the mobile phone countries are more in USA then in
Asia. It creates a negative impact and increases the cost of production for the companies which
further reduces profits.
Table 2: Installing number of plants in next round
Mobile Phone company USA Asia
Geeks tech 15 6
OUI COM 18 5
9

Real tech 17 7
AJ Tech 13 7
Maxx Mobiles 20 15
Ochre 12 -
The companies are planning to increase their production plants. However, it is decided to
increase number of production plants in US rather than in India. It can create negative impact on
the companies because production cost involved in manufacturing mobile phones is more in
USA then in Asia. It is advised that the companies should expand in Asia rather than in USA. In
case of Ochre, the company is not at all investing in Asia to create a manufacturing factory
which can go against the profits of the company. It is advisable that Ochre should also invest in
establishing a manufacturing plant in Asia.
Production cost per unit incurred when technology 1 is used by OUI Com is 50.24 and
that of in Asia is 43.73. In similar manner, Real tech incurred 42.75 in USA and 33.83 in Asia.
The production cost incurred by AJ Tech and Maxx mobiles in USA is more than that of cost
incurred in Asia. The factors can be lenient rules in Asia with regard to production. The cost also
involves electricity, machinery and labour cost which is way cheaper than that of USA.
However, production scrap percentage is overall more in Asia than that of USA. It shows that the
optimum utilization of resources is carried when the product is produced in USA and it is
required to be followed in Asia as well.
Performance Improvement Recommendations
All the mobile phone companies are carrying out production and are established in three
markets they are, Asia, Europe and USA. The reason of their presence in these geographical
region is due to expanding mobile phone market in these countries. Some companies are
performing good in USA and some are performing better in Asia and Europe. It depends on
various social, economical, political, legal and environmental factors that where the company
will be able to grow more. Based on various analysis conducted above, it is recommended that
companies like Ochre and Geek tech are required to concentrate more on their action of
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expansions due to constant losses faced by these companies. It is also advised that these
companies are required to study the market properly and understand the taste and preferences of
the customer. Further, they should research that who are the potential customers for them in the
prevailing market. On the contrary, OUI Com, Real Tech and Maxx mobiles are performing
good in the international market. However, it is recommended that Maxx Mobile should reduce
its cost of production as it is on higher side in comparison to the profit it is earning in all the
rounds. By reducing the cost it will be able to earn higher profits and Maxx Mobiles will be able
to grow more.
Based on the available production plants, it is advised to all the mobile phone companies
that they should own more manufacturing factories in Asia rather than in USA due to availability
of cheap labour, reduced cost of material and low cost of land to establish factory. It will help in
reducing cost of production and hence increase profits. Basically, it is advisable to expand in
Asian market rather than US or European market. It will help the companies to grow and expand
which ultimately result in higher market share and maximizing profitability.
PART 2 – Stakeholder Summary
Stakeholder Analysis
In the context of business enterprise, stakeholder is one of the major concern who directly
and indirectly affected by the decisions of firm. They are those people who have interest in the
company and who have some role in the business activities and functions. While management
takes any decision regarding business activities, policies, practices, functions then stakeholders
may largely affected. IKEA is a private company which deals in the furniture products. It designs
and sells the furnitures, appliances and home accessories. It is one of the famous furniture
retailer in the world whose stores situated at various locations all over the world. Major
stakeholder are government, employees, suppliers, customers and investors. In order to attain the
objective of firm, it is very important to manage and satisfy all stakeholders. These all people
have some interest with company so it is a responsibility of business unit to keep them satisfied
and consider their interest in the business (Ferreira and et.al., 2014). Following are some ways
through which IKEA can consider interest of stakeholders and make satisfy them-
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 Keep satisfied- Government is another major stakeholder who desires fair information
and financial status of the organisation. It has high power and low interest in the
corporations. IKEA have the responsibility to disclose fair financial status and pay fair
tax according to taxation policy. In addition to this, company can satisfy government by
involving in the corporate social responsibility and maintain the high quality in product
and services. Manage closely- Employees are major part of the business unit who assist in surviving
business activities and function. In the absence of personnels, IKEA can not run its
business functions. Human resources have main interest in keeping update about the
policies, practices, activities and financial status. They require an effective working
conditions and salary. If management takes any decision regarding business then it is
very important to take employees participation (Lovejoy, Waters and Saxton, 2012).
Employees have high power and interest so that corporations are required to manage
them closely.
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Illustration 8: Stakeholder Analysis
(Source: Verbeke, , 2013)

 Monitor- It refers to public and competitors who always wants to know about the
company strategy, product innovation, action etc. They have low power and low interest.
It is great responsibility of IKEA to monitor the activities of competitors and public. In
the context of public, company requires keeping analyse the demand of them regarding
product and services so as it can effectively fulfil.
 Keep informed- Customer is one of the major stakeholder of the organisation who have
huge interest in the organisation. Basically, they require high quality of product and
services at reasonable and fair prices. They require regular update about the product and
services. They have higher interest and low power that is why IKEA should keeptheir
shareholders informed about the prices, feature, discount and distribution about the
furniture products. The profitability and market share of corporation is largely depends
upon the customer satisfaction (Needham and et.al., 2012). While IKEA changes any
prices, features and location of the stores then customer requires the accurate information.
Critical Evaluation
IKEA is a leader of furniture industry. The company was able to generate global revenue
of approximately 35 billion Euros in fiscal year 2016 due to its knowledge about the needs and
demands of the customers. Based on the reports of “Brandz Top 100 most valuable global brands
2016”, IKEA stood fifth in most valuable retailers of the world. The company operations is
present in around 183 stores and shares its presence in 47 countries worldwide.
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IKEA is experiencing high revenue year by year. Revenues have increased
drastically since 2001 which was around 10.4 billion Euros approximately and has reached to
approximately 35.1 billion Euros in 2016. The company keep adopting new and innovative ways
in order to work efficiently. It also tries to be as cost effective as possible in order to generate
higher returns. The material used by the company helps to fulfil the concept of sustainable
environment. The packaging material used by the company is less costly and new ways of
packing, handling and transporting the product to its end consumers. The packaging material
used by IKEA is also user friendly. It understands the taste and preferences of the customer to
fulfil their needs in better way (Verbeke, 2013).
IKEA have been involved in competition with UK based B&Q which has a great
advantage on the price and distribution strategy over IKEA. However, IKEA have been able to
earn higher revenues in comparison to B&Q but has to reduce prices in order to remain
competitive. John Lewis is also in competition with IKEA in terms of furniture provided by the
company. IKEA is planning to double the size of its business by 2020 by increasing its market
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Illustration 9: IKEA group's revenue
(Source: Annual revenue of the IKEA Group worldwide, 2016)

share in terms of furniture. The company is also adopting appropriate strategies in order to
increase its existing customers base and generate higher profits.
The major stakeholders of the company are creditors, employees and , customers. The
company cooperate with trade unions and learn and share experience with the employees in order
to stay involved with them. It further takes important measures to protect the rights of the
customers by providing them products which are value for money and do not have bad impact on
the environment. It does not compromise with the quality of the product and sustain on the
benchmark which is set in terms of quality standards and provide the products to its customers at
lowest possible prices (Wild and Han, 2014). IKEA provides proper training and development to
its employees so that they can work in their full potential and help the company to achieve
organizational objectives. It has helped the company to grow, stay competitive and maximize
profits.
CONCLUSION
Based on the above report, it can be articulated that, Cesim, which is a simulation game,
helps the students to gain the experience of real competitions among companies virtually. It
helps to develop business and strategical skills in an individual. Various strategies have been
discussed in order to conduct business in Asian, European and US market foe a mobile phone
company. In second part of the report, the internal and external stakeholders of IKEA are
creditors, employee and customers. It shows that the company's one of the most important goal is
to fulfil the expectations of stakeholders. Based on the financial performance of IKEA, it can be
concluded that the company is generating higher revenues' year by year.
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REFERENCES
Books and Journals
Ameer, R. and Othman, R., 2012. Sustainability practices and corporate financial performance:
A study based on the top global corporations. Journal of Business Ethics. 108(1). pp.61-79.
Barnett, M. L. and Salomon, R. M., 2012. Does it pay to be really good? Addressing the shape of
the relationship between social and financial performance. Strategic Management
Journal. 33(11). pp.1304-1320.
Cavusgil, S. T. and et.al., 2014. International business. Pearson Australia.
Fagerholm, N. and et.al., 2012. Community stakeholders’ knowledge in landscape assessments–
Mapping indicators for landscape services. Ecological Indicators, 18, pp.421-433.
Ferreira, M. P. and et.al., 2014. Mergers & acquisitions research: A bibliometric study of top
strategy and international business journals, 1980–2010. Journal of Business
Research.67(12). pp.2550-2558.
Lovejoy, K., Waters, R. D. and Saxton, G. D., 2012. Engaging stakeholders through Twitter:
How nonprofit organizations are getting more out of 140 characters or less. Public
Relations Review. 38(2). pp.313-318.
Needham, D.M. and et.al., 2012. Improving long-term outcomes after discharge from intensive
care unit: report from a stakeholders' conference. Critical care medicine. 40(2). pp.502-
509.
Verbeke, A., 2013. International business strategy. Cambridge University Press.
Wild, J. J., Wild, K. L. and Han, J. C., 2014. International business. Pearson Education Limited.
Online
Annual revenue of the IKEA Group worldwide. 2016. Available through:
<https://www.statista.com/statistics/264433/annual-sales-of-ikea-worldwide/> [Accessed
on 01st July 2017]
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