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Company Background
DEEP BLUE INTERNATIONAL, INC
A multi-divisional firm operating in the
Company Background
SBU#2
Software
SBU#3
Integrated MIS
Company Background
Two level decision making process
SBU: President
Parent corporation:
CEO
Board of Directors
Mission Statement
To be the market leader in the
information industry through the
establishment of competitive
advantages so as to increase the
value of the company.
Strategy
Target on High-end product consumers
Strategic development on vertical
applications
Achieve competitive advantages by
Increasing marketing, operation
technology new product research and
HR investment.
Operation of SBU #1
Pricing Strategy: High end and keep increasing
Operation of SBU #2
Pricing Strategy: competitive in high end
Constant improvement and moderate
Operation of SBU #2
Capacity expansion Strategy:
Operation of SBU #2
Operation of SBU #3
Pricing Strategy: competitive in high end
Constant improvement and moderate
Operation of SBU #3
Capacity expansion Strategy:
Operation of SBU #3
area 4, 12.8%
Sales: from $3376 to $3603 (7% )
Cost of sales: from $1631(48%) to $1594(44%)
Profit: $362 to $514 (42% )
SBU profit/sales: from 11% to 14%
(All numbers in thousands)
SBU1
300
SBU2
SBU3
200
100
0
1
Capacity Analysis
Capacity Analysis
Problem Areas
Cash management
Sales forecasting
Pricing
Corporate Decisions
Based on the SBU decisions
Sales forecast
Pricing
Immature market
Domestic
International expansion
Financial management
Capital Structure
Capital Needs:
Capital Structure
Decision Criteria:
Plan of action:
Ratio Analysis
Debt/Equity Ratio
2.50
2.00
1.94
1.69
1.50
1.67
1.51
1.21
1.13
1.00
0.50
0.00
1
Dividend Policy
In 1st period, we kept the previous dividend level
We decreased the dividend payment in 2nd
period
We decided to follow a constant amount plus
extra payment policy since 3nd period
We started by paying $.03 and kept increasing
the level of dividend according to our operation
profits increase.
Dividend Policy
Performance Evaluation
DEEP BLUE
INTERNATIONAL, INC.
Financial Statement
----balance sheet
Cash
909
Accounts Payable
1220
Accounts Receivable
2808
767
190
Current Liabilities
2177
6903
3717
21807
1712
Less Accum.
Depreciation
7077
Total Liabilities
10792
14730
Common Stock
4000
Retained Earnings
3655
Total Equity
7655
18447
Total Assets
18447
Financial Statement
---- income statement
Sales Revenue
9360
COGS
4068
Gross Margin
Operation Expenses
5292
3815
EBIT(SBU Profits)
1477
Interest Expense
363
Other Expense
46
1068
Taxes
320
748
Dividends Paid
40
Retained Earnings
708
EPS
0.94
Competitive Advantages
SBU#1
marketing
SBU#2
SBU#3
168
153
225
184
192
241
operation tech.
91
115
123
135
145
153
new product
79
81
96
135
119
136
sales person
2.5
2.5
1.75
1.5
1.75
employee
turnover rate
9.7%
8.4%
9.7%
9.0%
9.7%
7.7%
defective goods
2.4%
2.3%
2.2%
2.1%
2.1%
1.8%
service person
Evaluation: Profitability
Evaluation: EPS
Evaluation: Returns
Ratio Analysis
Strategy Adjustment
SBU1
SBU2
SBU3
Period
Profit
Expense
Profit
Expense
Profit
Expense
198
1681
380
2189
362
3014
224
1753
222
2631
356
3795
283
1771
395
2535
461
3577
182
2077
423
2736
366
3507
408
2006
549
2543
505
3199
426
2092
537
2702
514
3089
Total
1721
11380
2506
15336
2564
20181
Profit/Cost
15.12%
16.34%
12.71%
Strategy Adjustment
Initially, we wanted to strategically
expand SBU#3
Based on the profit/cost efficiency
analysis, we change the strategy to
follow a more balance expansion plan
In the latter period, we reduced the
capacity of SBU#3 by depreciation, while
kept the reasonable operation budget
Management Audit
Performance Summary
How many times the team have a zero cash balance,
Q&A
Thanks a lot!
Good luck in the real world!!