Individual Simulation Report 7
Individual Simulation Report
Firm C, Executive MBA,
Operational Planning and Policy
Dr. Sherwin L. Stewart
Our team, firm ind1-c, is comprised of three individuals with diverse educational and professional experience to bring a lot of value in making strategic business decisions in managing the automobile company in the Strategic Management Simulation contest. Based on the assigned class of vehicles, vehicle attributes, target consumer segments, vehicle price ranges, the financial position, and the market share in the industry, we spent the practice round to define our company’s vision, mission, and objectives.
Our firm’s vision is to motivate and leverage the passion of highly skilled workforce towards technology, engineering, design, and environment to deliver automobiles that offer world class experience to our customers, with a strong commitment to protect the environment. Our company offers vehicles that are engineered to provide high-end safety features, luxurious experience on diverse terrains, and solutions that move closer to a world with reduced carbon footprint every year. Our current target consumer segments are Families, High Income, and Enterprisers, and our core objective is to regularly identify the needs of our customers and improve products to align with the customer needs.
Our generic strategy was to adopt a broad product differentiation strategy by regularly improving the firm’s technology, development centers, vehicle attributes, and marketing investments to offer unique products to our customers compared to our rivals.
Strategic Action Plan
The strategic plan of action was to assess the data points mentioned in the following sections regularly in each period and address any applicable special decision(s). All these actions relate to our firm’s generic strategy.
Manufacturing and Product Development
Ahead of each round, we firstly considered reviewing the “Manufacturing” section to monitor the percentage of sales in the prior period and the number of vehicles remaining in the inventory. Generally, we decided to upgrade the vehicles (minor/major) in each period in the Product Development section, if the inventory was less than 10,000 units to limit the inventory write off losses.
Furthermore, we considered assessing the need to increase the firm’s Technology maximum in terms of Interior, Styling, Safety, and Quality specifications each period to ensure that we have enough buffer to make minor upgrades to our vehicles. As a rule, we decided to invest in technology to maintain the firm maximum at 2 units above the maximum attributes of our vehicles.
While we increased the corporate advertising budget with each period across different channels and regions to support out product differentiation strategy, after running the Test Market Research study in the StratSim tool, we understood that our target customers are more influenced by the promotions for each vehicle than advertising. Consequently, in the weeks 3 and 4, we invested more in specific vehicle promotions as opposed to advertising and laid more focus on Direct Marketing.
In terms of finances, our major costs revolve around increasing development centers (R&D), plant capacity, continuous vehicle upgrades, and conducting effective marketing initiatives because these areas a consequence of our mission. We aim to increase our sales, earnings, and free cash flow by enhancing the customer experience through high-quality automobiles and strengthen customer awareness through targeted marketing. All these aspects will lead to an increase in dividends for our shareholders. As of the end of fourth period, our firm pays dividends worth $700 million in total.
The only operationally reactive move that we took after the first week was to increase the plant capacity to meet our consumer demand. As our scheduled production fell short of the consumer demand by ~10% after the first week, we decided to gradually increase our plant capacity by 200,000 units from the second week. We added the task of adjusting the plant capacity to our generic strategy.
Impact of External Environment on Moves and the Results
Our decisions were primarily driven by the firm’s vision of offering world class customer experience and safety features. However, we guided our decisions about vehicle prices primarily based on the competitors’ price range and vehicle attributes within each vehicle class.
As we made upgrades to our vehicles to offer improved vehicle specifications each period and set the advertising and promotions expenses based on the Test Market study, our unit market share increased by 3.7% over the last four periods and our firm (ind1-c) preference increased from 20.3% to 30.2%. As our plant capacity increased to meet the rising demand, our net income rose from $1.2 million in the practice period to $2.4 million at the end of third period.
To continue putting efforts in line with our vision of reducing the carbon footprint, we are planning to release a new line of vehicles in the Alternative-energy-drive (AEV) vehicle class in the upcoming period. The likelihood to buy our new AEV concept showed 93.5% based on a Concept Test conducted in period #1. We are planning to gradually improve the vehicle attributes in the upcoming periods to stay aligned with our mission and offer high-end safety and experience to our customers through our automobiles. While we made use of research tools in StratSim like Test Market significantly and Concept Test to some extent, I would suggest my partners that we leverage other research tools in the future.
Lessons Learnt and Relation to Coursework
Strategy is about competing differently from rivals – doing what competitors do not do or doing what they cannot do (Thompson et al., 2020, p. 4). While that is the central lesson, the StratSim tasks reinforced the fact that well-formed mission, vision, and strategy gives a sense of direction in making critical strategic decisions.
Work Log and Collaboration with Teammates
Our team decided to meet at least 4 times a week over zoom sessions, where I took the lead to schedule meeting based on our availability. During this time, we shared our individual viewpoints backed by data analysis, weighed them, and took a poll to arrive at a common consensus and applied the decisions in the tool. Specific work log or meeting times is shown below:
· 05/04/2021 8 pm CST
· 05/06/2021 5 pm CST
· 05/11/2021 6 pm CST
· 05/12/2021 7 pm CST
· 05/13/2021 5 pm CST
· 05/16/2021 5 pm CST
· 05/19/2021 6 pm CST
· 05/23/2021 5.30 pm CST
Thompson, A., Peteraf, M., Gamble, J., & Strickland, A. J. (2020). Crafting & Executing Strategy: Concepts and Cases (22nd ed.). McGraw-Hill Education. 4
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