Analysis of StratSim

Analysis of StratSimThe StratSim is a growing and a wider spread industry or so the global among the auto sellers. Notwithstanding the economic and energy instabilities, that led to decreased vehicle demand, gross revenue revenues strongly maturationd as Gross Domestic carrefours (GDP) subjoin from f secondary rate 1- 4, and remains constant in layover 5, and inflation rate decreased from 2.5% period 1 to 1.0% in period 3. However, in somewhat circumstances, sales were increased and/or decreased since tightens started making decisions. These 7 competitors were true A, trustworthy B, unwavering C, firm D, firm E, firm F and firm G.In StratSim, there ar 7 vehicle classes Minivan (M), Family (F), Sports (S), Luxury (L), Utility (U) Economy (E), and Truck (T). Vehicle attributes being performance, styling, quality, home(a) and guard.Furthermore, advertisement plays a significant role peculiarly when firms striving to create brand image, awargonness as well as interests t o target customers. head teacherships contributed in generating revenues through sales of ranges of vehicles which in turn enabled the firm to increase its securities industry sh ar while maximising shareholders wealth. degenerate B has had 3 vehicle classes old-timer -TruckBoffo Familyand Buzzy Economy.2.0 Strategic AnalysisAccording to (Johnson et al, 2006, p 9), strategy is the stress and scope of an organisation over the long term, which achieves returns in a changing surround through the determination of resources and competence with the aim of fulfilling shareholder expectations. get a line 1. Processes by which strategy is described and executed.Sourcehttp//www.12manage.com/description-deliberate-strategy.html.In a competitive crinkle environment such as StratSim, analysing firms strategies is vital in order to lift performance and customer satisfaction.2.1 unshakable Bs Strategic IntentFirm Bs mission was to get going the leader in automobile industry oecumenic by offering highly innovative vehicles to diverse customer segments that get out consistently satisfy their dynamic needs.2.2 Objectives2.3 Basic StrategyOur strategy was to provide safe(p) quality vehicles at premium price trying to differentiate our vehicles from incumbents while avoiding price war from our competitors. By doing so, we became the leader twice in economy (Buzzy) car, period 2 and 5. To meet diverse customer taste and preferences, we made minor upgrades to our vehicles during decision periods, e.g. engine room, promotion, advertising, etc.2.4 External AnalysisScanning the macro-environment is vital since there are several factors that hinder firms performance and growth. In order for managers to come up with effective and suitable strategies that will enable the firm exploit overt and secret opportunities while overcoming threats, those factors need to be thoroughly tackled before decisions are made.The external analysis comprisesThe Michael Porters five force s.PESTEL analysis.Opportunities and Threats (OT) from SWOT analysis,And Critical Success Factors (CSF).2.4.1 PESTEL frameworkPESTEL framework is a useful tool that is employ by organisations to analyse the complexity of macro-environment variables. It in like manner provides a picture on how these key factors may influence firms success or failure of its particular strategies in future, so that managers can find ways of overcoming. PESTEL refers to political, economic, social, applied science, environment and legal.Figure 2 the PESTEL FrameworkSource (Johnson et al, 2006. p 68)The musical arrangement semipolitical Taxation policy authorities stability Social welfare policies Foreign traderegulationsLegal Health and safety Competition law Product safety Employment lawEconomic factors Business cycle Inflation Interest rates Unemployment GNP trends M iodiney supply DisposableincomeEnvironmental Environmental rampart laws Waste disposal EnergyconsumptionSociocultural factors Populat ionDemographic Socio mobility Consumerism IncomeDistribution Lifestyle changes Level ofEducation Attitudes to workand leisureTechnological Government spending onresearch Speed of technology transfer Newdiscoveries/developments Government and industryfocus on technological effort Rates of obsolescence governmental/LegalSince 1960, laws and government regulations have affected the automotive industry (Highfill et al, November, 2004). Political changes may favour or hinder the firms occupation since anti-pollution laws and taxes may be imposed, so, firm B should continuously pay special attention to any rules, codes and regulations regarding carbon-dioxide emissions.EconomicDuring mannequin, firm B had experienced unstable economic growth. Its variables like inflation, interest rates, swash prices, and material hails were fluctuated, these have affected firm profitability.Social payable to increased health awareness, people tend to change their lifestyles, while turning to number 1-emission vehicles, also income distribution and demographic population both affect vehicle production either positively or negatively.TechnologyRapid change in technology has provided both opportunities and threats to the automotive industry. Those who employ it effectively, it facilitates them in enhancing firms efficiency by producing vehicles that appeal to customers whilst lowers costs. So far, internet and firm websites as part of technology have been used by many buyers as a reference tool before making purchases decisions.2.4.2 Critical Success Factors (CSF)Johnson et al (2009) defined CSF as those product features that are particularly valued by a group of customers and, therefore, where the organisation must excels to outperform competition. CSF comprises scepter features and differentiators.Source Johnson et al (2009)CRITICAL SUCCESS FACTORS (CSF)THRESHOLD FEATURESDIFFERENTIATORS threshold featuresThese are features that customer values mostly, and they are likely not t o buy a product or service that lack one among them. In StratSim industry, threshold features are quality, performance, safety and size.DifferentiatorsThese are customised or added qualities some customers may/may not consider before purchasing a service or products. During our simulation, price, styling and interior were regarded as differentiators.In reality, differentiators have had given a difficult moment to distinguish what they prefer most, since many vehicles were similar among competitors after modifications being made during decisions.Lastly, firms should seize it seriously, creative and keep innovating in these CSF in order to outwit its competitors through customer satisfaction.2.4.3 Porters Five Forces modelThe 5 competitive forces model was developed by Michael Porter in 1980 (Johnson et al, 2006). Since then, the model is used by firms as a tool to analyse the attractiveness (profit electric potential) while determining the intensity of competition (threats) of an i ndustry, and last come up with the right strategies that will support in exploiting opportunities, neutralise threats and hence grow.Figure 3 Porters Five Competitive Forces modelSUPPLIER queen Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Supplier concentration Importance of volume to supplier electrical shock of inputs on cost or differentiation Differentiation of inputs Cost relative to total purchase in industryBARRIERS TO ENTRY Government Policy heavy(p) requirements Access to distribution Economies of scale Switching costs Proprietary learningcurve Access to inputs Expected retaliation Brand identity Absolute costadvantages Proprietary productsBUYER POWER Price sensitivity Threat of backward integration Substitutes available Bargaining leverage emptor concentration vsindustry Buyer information Buyer volume Buyers incentives Brand identity Product differentiationwww.scribd.comDEGREE OF RIVALRY Brand identity Exit barri ers Switching costs Product differences Industry growth Fixed cost/ value added Diversity of rivals Industry concentration Corporate stakes Intermittent overcapacityRIVALRYTHREAT OF SUBSTITUTES Buyer dip tosubstitute Switching costs Price-performancetrade-off of substitutesThreat of New EntrantsThe threat of new entrants in automobile industry is low, since barriers to enter are very high, such as high amount of start-up capital required. Moreover, incumbents have adequate experience curve, distribution access, economies of scale, strong research and development (RD) and even brand and customer loyalty. These become difficult for new entrants to manage as Incumbents can produce at mass to cover potential and existing customer needs.Bargaining Power of SuppliersSuppliers effect in automobile industry is low, since producing a car/vehicle requires a range of inputs (parts) from diverse suppliers. If some inputs not found in one supplier, it is lax to switch from one supplier to ano ther finding a substitute for the required input due to low switching costs.Threat of SubstitutesSubstitute threats in this industry is likely to be moderate and depends much on customer geographic jam, other customers like walking, taking train or riding bike. only in Dar es Salaam city for example, people prefer public transport, motorcycles (BAJAJ known as rickshaw in India) as alternative means to automobile due to increased congestion.Bargaining Power of BuyersIn this industry, buyers great power is a bit high. Low switching costs from one firm to another want for substitutes since most of the customers are price sensitive. For the case of the simulation game we played, most of the products were undifferentiated, so that, buyers can easily shifts to an alternative producer as well as products.Competitive RivalryThe intensity of competition in automobile industry is high due to lack of differentiation strategy and innovation among incumbents especi wholey to the 3 vehicle c lasses, i.e. family, economy and truck because most of the firm use similar strategies like price, this reduces market growth as well as profitability.2.4.4 Opportunities and ThreatsOpportunitiesAdvanced technologyFirms can use it more efficiently in enhancing product features that can appeal to the eyes of customers.Also use e-commerce to advertise and sell globally.Bargaining power of suppliers.Low supplier power is an advantages to an automobile firms since they can set input prices, and hence be able to enjoy cost advantages while offer redeeming(prenominal) quality products that will satisfy customers.European Union (EU)Automobile manufacturers can use the EU to sell their products.DiversificationDiversification can be through to widen the market to other untapped segments like high income earners or internationally and also locate the firms near raw materials where they can enjoy location economies.Differentiation strategyIn order to sustain customers, after satisfaction is b eing met, differentiation strategy can be used as a weapon in delivering a range of added values that surpass those of competitors, since most of the firms use similar strategies.ThreatsBargaining power of buyersStrong bargaining power buyers associated with low switching costs to alternative products, force suppliers to an increased competition in order to provide the best that will satisfy their customers.Increased gas prices shoot a line being one of the operating energy, increased price will also affect firms production as well as profitability e.g. in simulation that we played, period 1 $/gal was 3.15 rise to 3.50 in period 5.New lawsNew rules and regulations on carbon-dioxide emissions in environmental protection hinder production of cars that use petrol engines.World economic recessionRecession discourages consumption of luxury goods, and streamlines production while people turn to public transports.High competitionInitially, all firms in the StratSim industry were in similar position e.g. financially and other resources these prove difficult in making decisions on how to create demand in order to enhance market shares as well as profits. Each firm was competing.InflationInflation has started to increase in period 4 from 2.0% to 2.5%, this will affect consumer prices.Fuel price instability.Rapid change in technologyThis threatens vehicle production since other substitutes to vehicles may be produced.2.5 Internal Analysis2.5.1 Resources and CapabilitiesThese are those which will create a strategic fit in order for the firm to survive and prosper even in a competitive business environment.Lucino Noto, (2007, p 125)Analyzing resources and capabilitiesThe interface between strategy and the firmTHE FIRMResources and CapabilitiesGoals and ValuesStructure and SystemSTRATEGYTHE INDUSTRY ENVIRONMENTCustomersCompetitorssuppliersThe firm-Strategy InterfaceThe Environment-Strategy InterfaceOrganisation resources are divided into two categories (Johnson et al (2009) Tangible ResourcesThese are firms physical assets. Firm B physical assets wereThree vehicle classes, each of these represents a ridiculous configuration while targeting different customer segments like value seekers, families, singles, high income and enterprisers (the StratSim case, 2010).Financial resources, at period 0, each firm were given sales amounted to $ 15.5 billions (the StratSim case, 2010), which enabled firm B to diversify into different segments.Manpower, firm B had 4 competent human resources who made diverse valuable decisions and hence became twice the leader of economy car (Buzzy).Intangible ResourcesThese are non-physical resources such as information, reputation and knowledge i.e. intellectual capital. (Johnson et al, 2008). Firm B holds a number of crotchety competences over its rivals.Firm B capabilities wereQuality.Safety.Performance.Style.Interior.2.5.2 V.R.I.OAre criteria that are used to assess the sustainability of an organisation resources and capabili ty that will enable the firm achieve durable competitive advantages. V.R.I.O stands for Value, Rarity, Inimitability and Organisation. (Johnson et al, 2008).ValueAs the game started, firm B had enough resources and capabilities i.e. unique brand name that facilitated it in formulating and implementing different strategies to meet customer needs. But due to increased market demand, demand exceeded production in the periods around since the firm lacked efficiency.RarenessAt the beginning, all firms had similar starting point which led them to have a low degree of rarity. This positioning by StratSim made firm B to create more appealing strategies like vehicle enhancements and improvements in terms of its attributes which allowed it to come with things which moody out to be less common among the firms.InimitabilityDuring simulation game, product imitation was very high since previous results and almost all modifications and other statistics were openly make for other firms to see. Th is means that competitors can possibly copy other firms techniques.OrganisationIn StratSim industry, there were 7 firms producing identical vehicles, because they used similar strategies, lacking differentiation. Due to these, it became easily for customers to switch from one firm to another if satisfactions have not met.2.5.3 SWOT- SWSW is a tool that is used in identifying or analysing firms infixed strengths and weaknesses and enables it to use the available strengths to minimise or turned those weaknesses to strengths. SW means Strengths and weaknesses.StrengthsUnique brand name Best Motor Works.Unique product name calling like Buzzy, Boffo, and Boss.Twice leader of Buzzy-Economy car, period 2 and 5.Reliable dealerships.Innovation, almost every decision period, firm B upgraded its vehicle attributes to meet emerging customer needs.WeaknessesWeak financial position.Unstable growth of market shares.Limited product lines, this means that firm B did not exploit the available opport unities of unsatisfied and potential new customers to launch any new vehicle that will satisfy their needs.3.0 Decisions3.1 TechnologyFirm B upgraded its technology capabilities during decision periods considering dynamic business environment and customer tastes and preferences, while special attention given to economy (Buzzy) and family (Boffo) cars. Investment in technology facilitated firm B in enhancing its production capacity as well as vehicle attributes that appealed to target customers and hence satisfy their emerging needs.3.2 securities industryingFirm Bs marketing mix was to create leverage with customers and work out strong brand loyalty which will enable customers purchase our products even in intense competition as in StratSim industry. Firm B unique selling price USP was quality. Quality being the key in our products while charging premium price enable Buzzy (economy) car to become the leader in period 2 and 5. Despite this success, it was hard for firm B survive in just a success of one car and become the market leader. though the marketing mix was thoroughly applied by adding or reducing the number of dealers in each area, increasing dealer discounts and product promotions attracting customers, firm B marketing share was increased and decreased during decisions due to overspending. (For more marketing and distribution details for period 5, see appendix 1 2)3.3 FinanceDuring simulation, firm B financial performance was somehow poor despite a slightly increase in sales ($), net income was negative during period 2 and 5 results. We discovered that one of the problems could possibly be overspending, however, (Firm B performance summary period 5, see appendix 3).3.4 ProductionIn the year around, production was increased as well as vehicle attributes to meet customer demand. Though Boss (truck) and Buzzy (economy) vehicles were upgraded in period 4, there were some shortages on Boss this means that if we were given a chance to continue making dec isions, we could probably increase production to meet the demand (see appendix 4).4.0 ConclusionFirm Bs mission was to become the leader in automotive industry offering highly innovative vehicles to different customer segments that will satisfy their emerging needs. Unfortunately, firm B did not meet its expectations. Though it became the leader twice in Buzzy (economy) car, this means that its strategies fits in economy market, having success in one vehicle does not guarantee survival, thus why firm B income and market share fluctuated. We were not pretty sure of what contributed in unstable financial performance, though we speculated that overspending was one of the problems.4.1 What I Have LearnedI learned that, in the business, taking risks is the way of success. In StratSim industry, almost each period, market research has identified some potential new customers whose needs were not yet satisfied by current vehicle (the StratSim case, 2010). But firm B overlooked to take advant age of launching new vehicle in order to exploit these opportunities and hence increase our turnover and margins due to being risk averse.5. Reference and BibliographyJohnson G, Scholes K, and Whittington R, (2006), Exploring Corporate Strategy,seventh Edition, Prentice Hall.Johnson G, Scholes K, and Whittington R, (2009), Exploring Corporate Strategy,Prentice Hall.Highfill D, Baki M, Copus S, Green M, Smith J and Whineland M, (November, 2004). Automotive Industry Analysis-GM, DaimlerChrysler, Toyota, Ford, Honda, overview of industry analysis, available at http//www.academicmind.com/unpublishedpapers/business/management/2004-11-000aaa-automotive-industry-analysis.html. Accessed on 19/11/1010.The StratSim Case (2010), Automobile industry.Lucino Noto, (2007), Analysing resources and capabilities the interface between strategy and the firm, available at. http//www.blackwellpublishing.com/grant/files/CSAC05.pdf .Figure , Porters Five ForcesAvailable at www.scribd.com/doc/16998313/Diagr am-of-Porters. Accessed on 20/11/2010.6. APPENDIXES1. Technology Capabilities decimal point 5Firm Ratings (1=low capability)Dev. CentersInteriorStylingSafetyQualityMax. Feasible511121112Firm A34647Firm B34657Firm C24766Firm D24656Firm E26868Firm F24646Firm G35879Tech DimConsiderationsInteriorflexibility of cargo spaceStylinggeneral curb appeal, styling, handling, finishSafetygeomorphologic design, braking system, safety featuresQualityoverall reliability, durability, consistency of productsStratSim Indind1 FirmbPeriod 52. Marketing circumstance Period 5Firm BConsumer cypher(mill.)Company Owned/FleetBudget(mill.)Regional Corp. Adv.$48Direct gross sales Force$0Direct accouterments$6Direct Mail$0Public Relations$12Total$66Total$0VehicleVal MktShareMSRP mongerDisc.Avg SellPriceAdv.(mill.)Adv.ThemePromo.(mill.)old ageInv.Buzzy2.4%$11,55012.0%$10,572$33Quality$2018Boffo9.4%$20,40015.0%$18,749$34Safety$290Boss3.2%$20,49913.0%$19,859$28Perform$150Total$95$64StratSim Indind1 FirmbPerio d 52.1 Product marketing period 4VehiclePlatformMSRP DealerDisc. Adv. (mill.)Adv.ThemePromo.(mill.) BoffoNo modify$20,40015.0%$34Safety$29BossUpgraded$20,49913.0%$28Perform$15BuzzyUpgraded$11,55012.0%$33Quality$20Total$95$642.3 Distribution Detail Period 5Firm BNorthSouthEastWestTotalFull Coverage200250150200800 launch Dealers137137133133540Coverage69%55%89%67%68%Planned Openings109111242Support/Dealer (000s)$150.6$150.6$153.2$153.2$151.9Units/Dealer2,1872,2842,3892,7562,401 gross sales/Dealer (mill.)$36.9$38.9$40.2$46.3$40.5Service/Dealer (mill.)$1.4$1.5$1.6$1.7$1.5Gross/Dealer (mill.)$3.3$3.6$3.6$4.1$3.7Dealer Rating5960606160StratSim Indind1 FirmbPeriod 52.4 Product Contribution Period 5Firm B Product ContributionVehicleUnits (000s)DealerSales (mill.) DirectSales (mill.) COGS(mill.)Gross Margin(mill.) Adv Promo(mills.)After Mkting(mill.) Boffo734$12721$0$9797$2924$63$2861Boss234$4179$0$3262$916$43$873Buzzy329$3342$0$3319$24$53$-29Total1,297$20242$0$16378$3864$159$3705Note saw buck amounts are in millions.StratSim Indind1 FirmbPeriod 52.5 Vehicle Classes Period 5ClassMfr SalesRetailSalesUnit Sales%Chg (units)Num.Veh.LeaderEconomy$17,296$17,9041,726+5%7BuzzyFamily$84,734$91,1284,816+4%7EfizzLuxury$0$00NA0Sports$0$00NA0AEV$0$00NA0Minivan$4,950$5,421220NA1GoofyUtility$0$00NA0Truck$29,506$32,2781,669-1%7AceTotal$136,486$146,7328,431+6%22EfizzNote Dollar amounts are in millions, units in thousands.StratSim Indind1 FirmbPeriod 53. Performance Summary Period2- 5Firm BPer. 2 Per. 3 Per. 4 Per. 5 Sales ($)$14,800.9$17,418.6$18,244.8$20,242.1Sales (000s units)9121,0881,1441,297Market Share ($)13.5%14.9%14.2%14.8%Market Share (units)13.6%15.0%14.4%15.4%Net Income$-897.1$249.1$494.4$-239.3Cum. Net Income$-373.6$-124.5$369.9$130.6Stock Price$18.95$22.74$26.42$26.46Market Value$9,472.5$11,370.3$13,208.4$13,232.1Return on Sales-6.1%1.4%2.7%-1.2%Return on Assets-10.0%2.6%5.1%-3.3%Firm Preference15.2%14.9%13.5%15.0%Dealer Rating57586060COGS74.4%76.2%77.7%