Strategies of Capsim Company - Case Study Example

The paper "Strategies of Capsim Company" is a great example of a case study on business. The company's distribution margin is 30.3 percent. Computation of distribution margin involves subtracting the sum of direct labor, direct materials, and inventory carry from sales. Capsim Company has both variable and fixed costs in their daily operations. An optimal balance exists between fixed and variable costs. In the case of Capsim Company, the optimal balance between the two costs is 7.5. The balance ensures that the Company lowers its costs while increasing profit margins.

Capsim can generate revenue with the aim of controlling its costs in order to increase its profit margins in various ways. The company provides simulation services to individuals undertaking research. First, the company can enhance its adaptability in order to widen its market base. It should accommodate undergraduate, graduate, and corporate clients. Secondly, Capsim should also improve its flexibility. The Company should provide flexible simulation services that would attract more customers. Equally, it can generate more income by improving their scalability. Scalability enables the business to serve more clients thus increasing their profit margins.

Increasing the awareness and accessibility of the products offered by Capsim Company would cost a significant amount of money. The company would meet the cost of advertisements and promotions, labor, appreciation, variable cost and tax. The cost sums up to $ 113224(31839+75786+4030+1563). It is noteworthy that Capsim's investments would yield returns in a span of eight years. The return includes liquid cash, stock, assets, appreciation, debts, and equities. Returns on the investments add up to approximately $178254.

Recovery from initial financial investment depends on diverse factors. Proper management of financial trends is a vital determinant of returns for all investments. Based on the company’s income statement, there is a net profit of 4.1 percent. Different products have varying levels of profitability. Recovering from initial financial investments will take approximately five years considering factors that promote or decrease it. The level of EBIT influences recovery time for initial capital. Costs of depreciation hamper recovery by slowing profitability. The extent of investment in research and development is important as a determinant of recovery. Planned return for every segment is justified and viable. Initial segments are attainable for the period planned.

Investing in research and development for the company is a strategy that enhances innovation. Innovation for every company drives development and growth for businesses. Investing in research and development for low end and traditional end segments are the most viable option for the company. The two segments, low and traditional, are highly reliable for customers compared to high-end segments. Industry growth for low and traditional end segment is high to ensure profitability for the business. At the beginning of the simulation, it is prudent to invest in R&D for products that attracted the highest market demand. The performance segment has the highest growth rate. Based on the buying criteria, it s prudent to enhance research and development in the traditional segment. During the eight-year period, it would be prudent to invest in all the segments through the proper timing of the growth patterns. Investment in the segments would be based on market trends and customer demands. Market expansion trends for the different segments are imperative in enhancing expansion and investment in research and development. Industry condition report dictates the various investment decisions made for the company.