Market analysis of Stratsim management simulations

Market analysis of Stratsim management simulations StratSim management simulations are on-line games pioneered by Michael Deighan and Stuart W.James from Virginia USA aimed at giving students a wider exposure in the real world business arena. The initiators perceived students to view the simulations as a unique learning event where the knowledge gained so far within the academic years could be now made into practices. Quintessentially, apart from being a learning experience it was anticipated to bring a challenge to both managers and executives. According to the case, This is far easier to say than to achieve. 1.1. Industry Overview StratSim management simulation was a game-like, all about different firms operating in an automobile industry whose managers compete to the maximum by setting goals and objectives that are intended to outwit its immediate and within industry competitors. The managers used efforts to the best of their abilities so as to ensure right decisions are put forward just to earn superb profits due to greater sales ascribed by the management. Altogether, throughout the simulations there had been a total number of seven (7) firms ranging from firms A, B, C, D, E, F A and G. The initial alphabets of each firm meant that its respective vehicles began with either of them from A until G. All these firms had a similar starting point to commence its operations including funds. Among the firms, the best one was to be judged on performance bases mainly in terms of market share, market value, income generated as well as efficiency in playing with the marketing tools i.e. marketing mix (4 Ps). 1.2. Firms Overview Firm F was a group formed by four members who are Raya Nassor, Sarah Alley, Shahista Hasmani and I, the author of this report. Firm F comprised of three (3) vehicles which were Fantasy, Fast and Fish while their classes were Family, Truck and Economy respectively. I worked hand-in-hand with my colleagues in making the best decisions for our firms survival in an ocean of high waves of competition. The firms utmost intention was to position itself as a market leader by entering new markets and meeting the needs and desires of customers through vehicle attributes. However, there was a class which wasnt served by almost all the rival firms. It was known as AEV which must be addressed as technology modern with integrated marketing efforts. As far as Firm F is concerned, my colleagues and I decided not to opt for it as our firm was keen enough on cost minimisation and not spendthrifts of resources. 2.0. Mission and Vision Mission Statement Mission statement aims to provide employees and stakeholders with clarity about the overall purpose and raison dà ªtre of the organisation. (Johnson et al 2009, p.112) According to Peter Drucker (father of modern management), what is our business? is all about its mission. It is also known as creed of statement. Firm Fs statement of purpose could be: To address different consumer segments desires through value creation with respect to their financial capability when it comes to automobiles and eventually ending-up with immense profits generated from sales. Vision Statement A vision statement is concerned with what the organisation aspires to be. Its purpose is to set out a view of the future so as to enthuse, gain commitment and stretch performance. (Johnson et al 2009, p.112) Therefore, firm Fs dream is as follows: To be a company of the people, for the people and by the people in the automobile industry. 3.0. External and Internal Analysis These are the frameworks used to carry out an analysis of an organisations progress by examining two major extremes, the inner (internal) as well as the outer (external) environments. 3.1. PESTEL The PESTEL framework categorises environmental influences into six main types: political, economic, social, technological, environmental and legal. (Johnson et al 2009, p.25) The external environment is much more complex than internal because the earlier could exert enormous pressure to firm F to the extent of determining its ways to carry on its operations. Now let me examine all the six factors while reflecting firm F. Political This refers to the roles played by the government together with the degree of countries stability which will influence production of the motor vehicles for firm F to move on or lag behind. Also, this factor will determine whether the firm is undermined by a particular set of restrictions in its business such as not manufacturing vehicles which are similar to those possessed by the government. Throughout my analysis, all the firms including firm F were operating in a peaceful environment for the following reasons: Firms were increasingly thinking on product development and further production. Various customer categories continued to buy automobiles of their desire as they did not doubt the political situation in their areas. Increase in the number of dealers in all the extremes of a compass direction. Economic Within the course of the game, the business cycle wasnt predictable due to the fact that pricing structures employed by the automobile firms was different to one another. Firm F and other were aggressive towards increasing the dealer discount rates thinking that it would boost its motor vehicle sales and hence increase its profitability. However, the economy of the firms operating in the simulation kept on deteriorating with reference to the starting market shares, market values, stock price and overall net income. At the end, economies were badly shaped. Social This refers to the society in which the firms are operating their automobile business. Within the society, people differ in culture and demography. Some had been considering others as their point of reference in buying certain cars. Also, its obvious that as there are many automobile firms means more vehicles down the roads and hence more traffic collisions to the extent of delaying people planned activities during the day. Technological Advancement in technology was restricted among the firms as there were maximum limitations of technological capabilities in interior, styling, safety and quality extremes for which not a single firm could exceed. Above all, the firms were given an opportunity to make developments and marketing for a new class i.e. AEV which at the start had no introduced vehicle. The AEV being technology-driven, it is possible that it could use electricity, gas or other means. From my narrow view, I perceive AEV development to be more risky. Environmental Here Im greatly concerned because while vehicles are developed who knows how the waste materials are damped. This may have greatly deteriorated the soil and the species inhibiting in and on. These vehicles emit green house gases which add more health concerns to its own users through pollution after the fuel has been burnt in the engines. Legal It is up to the government to make sure that, a firm which goes against the labour laws, health and safety regulations, environmental preservation and trade practices are debarred from operating in the automobile industry. The government should enact laws which limit the number of vehicles to be owned by a single person unless it is big company with large operations in-order to minimise pollution on air, land and water sources. 3.2. Porters Five Forces Model According to Michael Porter, there are five cut-throat forces that demonstrate the rules of competition within the automobile industry and which determine both industry attractiveness and the degree of profitability. These forces are: Threat of new Entrants Throughout my analysis, I realised that for a firm to enter into automobile industry is not that much easy due to the reasons that, too much investment funds will be required to have a successful starting point as a matter of fact its not all about producing but knowing the needs of the market through Research and Development (RD) which costs greatly. For late movers, enjoying economies of scale will be highly minimal because there are giants already operating in large scales. Some of the giants may have done either backward or forward integration which may distract new entrants. Hence, the threat of new entrants in the automobile industry is low but firms need to be extra careful as the world is dynamic. Threat of Substitutes There are plenty of substitutes to vehicles but it doesnt mean people will shift towards them i.e. bicycles, scooters and walking. I dont expect people to abandon automobiles due to increasing costs instead people will shift to more economical ones from luxurious. Hence, the threat of substitutes is medium. Bargaining power of Suppliers Suppliers degree of power is low due to the existence of a big number of components and parts distributors in the automobile industry. It is likely for a manufacturer to switch from one supplier to the other. On the other side, firms at StartSim are likely to enjoy low prices of components because suppliers are many. Bargaining power of Buyers In the StratSim world, this is high as customers are likely to navigate from one manufacturer to another if their needs and desires are not well addressed considering the fact that, there are almost seven (7) firms operating in automobiles. Reluctantly, firms will be forced to stick on customers decisions on the requirements, pricing and other vehicle attributes. Customers are the core and a major reason for the firms existence. Rivalry Intensity This is very high because of the presence of many firms including firm F operating in the automobiles. These firms used various business strategies which have got differing effects to the competition intensity. Hence, the degrees of profitability and market shares will differ at large. 3.3. SWOT ANALYSIS This is a framework used to examine internal and external environment. Strengths (Internal) Firm Fs names of its motor vehicles were unique i.e. Fantasy, Fast and Fish which couldnt be easily imitated by its rivals. Weaknesses (Internal) Mismanagement of stocks which had a greater fall in value together with more inventory days. Failure to make proper use of the marketing tools i.e. promotions and prices. Firm Fs product ranges didnt compete effectively with those of its competitors. Opportunities (External) The AEV class vehicles could be a platform for firm F to maximise its market share and sales growth. Poor performance in other firms could allow firm F to gain more customers who couldnt benefit from the earlier firms. Moving into markets which were not served before through market and product development. Threats (External) Continuous technological developments for which firm F couldnt cope. Global economic recessions resulting to fall in currencies and slowing vehicles demands. Automobile industry being competitive, firm Fs employees may have been head-hunted by other rival firms leading moving away the company secrets. 4.0. Strategic Planning Strategy is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations. (Johnson et al 2009, p.3) Planning refers to making decisions on which strategic choices to carry forward in the course of the business. 4.1. Basic Strategy Firm Fs long term strategy is to offer vehicles with the lower possible investments but in maximum numbers with the intention of increasing the net cumulative income and market share from period 1 until period 4 with much focus on the Family class. 4.2. Technology Firm F thought that to go hand-in-hand with advancing technology as not necessary because it could lead it away from high profitability. Instead minor upgrades in the vehicle attributes are considered. Technology will be used to minimise wastage so as to increase productivity. 4.3. Financial Control The management of firm F aspires to have immense sales and increasing profitability but at same time controlling Research Development as it wont like to spend a lot for it. It looks forward to increase assets held while decreasing liabilities including debts. 4.4. Marketing Firm F intend to create awareness to both society and potential customers through advertisements and promotions. Also, efforts will be done to review pricing structures and the vehicles with related products to be of value to customers. Distribution points will be monitored too. 4.5. Future Development The management of firm F looks forward to do major upgrades in its motor vehicles if the level of profitability will permit it to do so. Otherwise, the kind of development which is expected could be maximising of the firms plant production capacity. 5.0. Lesson I learnt from simulation exercise I came with a mindset that a firms market share could be inversely proportional to net cumulative income. Also, it wasnt a good idea at times to discuss with members from rival groups as my group was at last decision mislead by another group leading to its low income and stock price too. Teamwork is the essence towards achieving success as decisions were jointly made by group members who differed in knowledge, background and experience. 6.0. Conclusion To me, it was much lucrative due to the fact that I had been exposed from theoretical to practical because the simulations made me think outside the box as to whether the strategies I took part in could outwit competitors. Finally, I agree that a business without strategy wont have a direction.