BUSINESS STRATEGY GAME REPORT   Student: Professor: Course Title: Date:                   Table of Contents Title: Business Strategy Game Report 3 1.0        Introduction. 3 2.0        Competitive Strategy. 3 3.0        Industry Overview.. 4 3.1        PESTEL.. 4 3.2        Five Forces of Competition Framework. 6 3.3        Opportunities and Threats. 7 4.0        Company Overview: Company E.. 8 4.1        Potential Strengths and Weaknesses. 8 5.0        Decisions Made. 9 6.0        Final Results. 12 7.0        Reflection. 14 8.0        Underlying Strategic Principles. 14 9.0        Key Learning Points about Strategy. 15 10.0     Conclusion. 16 11.0     References. 17 12.0     Appendices. 19                

Title: Business Strategy Game Report

1.0       Introduction

Business strategy is understood as the means through which an organization sets out to attain its objectives and goals. It is essentially a long-term business planning. Strategy is a direction towards a given goal (Williams 2009, p. 117). Strategic thinking is of great importance in the multi-faceted, dynamic and complex business world of today. Managers at every level have to possess strategic skills and be capable of thinking strategically (Johnson, Whittington & Scholes 2012, p. 42). This paper provides a reflective report on the business game simulation. The generic competitive strategy pursued by our company, namely Company E, is discussed. The report also describes the competitive strategy, industry overview, overview of Company E, decisions that managers of our company made from Y11 through Y15, the final results showing how Company E performed overall, and reflection on the company’s performance. In addition, a discussion on the underlying strategic principles is provided. Lastly, the key learning points with regard to strategy are analyzed.

2.0       Competitive Strategy

Company E pursues the low-cost strategy, which is commonly referred to as cost-leadership strategy, as it attempts to gain real competitive advantage. By using this competitive strategy, Company E is seeking to operate more cost-efficiently than other firms, minimize its expenditures, and offer its products at prices lower than that of its competitors. Uggla (2015, p. 8) mentioned that the low-cost strategy is crucial to stimulating the demand of an organization’s products and helps to increase sales.

3.0       Industry Overview

3.1       PESTEL

Political: The political environment within the markets or regions in which Company E has a presence has a significant influent on the operations of the firm. While political stability in most countries in North America, Europe-Africa, Asia-Pacific and South America provides a conducive environment for business, political instability in some individual countries especially those marred by civil wars such as South Sudan, Iraq, Libya and Syria provide an environment that is bad for business and hinders business growth. Furthermore, Company E must comply with all the relevant laws of the countries in which it operates, for instance import/export laws, labour laws, as well as laws pertaining to the environment, taxation, reporting financial results, among others (Issa, Chang & Issa 2010, p. 74). Economic: in many countries in the Asia-Pacific region such as India and China; Europe-Africa region such as Russia, Nigeria, Turkey, Poland and Ethiopia; and Latin America region such as Chile, Argentina and Brazil, the economies are growing very fast. This has a positive impact on our company since the demand for its product items is likely increase in these markets. This will boost the overall sales, revenue and profit made by the firm. Thanks to economic growths in various markets in the preceding year, Company E was able to record substantial profit of $25 million and enormous sales of $238 million. Our company is also affected by other economic aspects such as inflation and interest rates in the markets in which it operates (Dockalikova & Klozikova 2014, p. 422). Social: in all the geographical regions wherein Company E operates, there is the trend toward health consciousness among people. Individuals want to keep fit and stay healthy, and are exercising more (Evans & Richardson 2015, p. 16). Thanks to this trend, the demand for sports shoes is projected to go up. Furthermore, stylish sports shoes are becoming more and more popular amongst people of all demographics, including children, teens, and even adults. They are purchasing trendy sporty sportswear not just for sports activities and exercises, but also to use them for casual and leisure wear. This will certainly increase the demand for Company E’s shoes in years to come. Technological: for any firm that engages in manufacturing of products such like our company, technology is of great importance in improving various operations within the company, such as product design, assembly line, and interacting or transacting with the customers (Dockalikova & Klozikova 2014, p. 424). In the footwear industry presently, no producer possesses a technological advantage over other firms that gives them an edge. The process of manufacturing the shoes is being done manually by hand. Even so, the use of online sales has been implemented, enabling individual consumers to be able to buy footwear products online on the websites of these companies. Environmental: these days, more and more companies globally are starting to take into account the negative impacts of their operations on the environment. Corporations are also taking the issue of sustainability more seriously as increasingly countries are passing stringent laws that compel companies to operate in eco-friendly ways owing to global warming and climate change concerns (Evans & Richardson 2015, p. 24). All in all, companies are seeking to decrease their carbon footprint. Legal: all companies in the footwear industry are affected by the laws of the regions in which they operate. It is important for them to obey such laws or else their business license would be revoked. Some specific countries have laws that are supportive of multinationals, but others have laws that tend to discourage the entry of multinationals in certain sectors.

3.2       Five Forces of Competition Framework

Rivalry among Players in the Footwear Industry, High: rivalry and competition among the footwear companies is very stiff and fierce. Each firm is trying its best to beat the others in the global marketplace. Such intense rivalry clearly threatens Company E’s market share growth. Bargaining Power of Suppliers, Medium: suppliers have a moderate or medium bargaining power because of two major reasons. Firstly, the switching cost for footwear manufacturers is high and thus they cannot afford to easily switch from one supplier to another (Rice 2010, p. 376). Secondly, there are numerous suppliers from different parts of the globe and they compete aggressively amongst themselves for orders from the footwear companies. There is no specific supplier who enjoys a substantial bargaining power. Threat of New Entrants, Low: the threat of new players entering the footwear industry is generally low because of the following reasons: substantial amount of financial resources needed to set up a manufacturing plant, purchase the necessary equipment and machinery for the manufacturing process, and conduct marketing and advertising; skilled expertise required; and the large number of employees required to work in the factory (Randall 2011, p. 13).                                                     Bargaining Power of Customers, High: in this industry, the main clients comprise individual shoppers who may buy the product online, and large wholesale retailers who purchase the shoes to resale to the end-customers at a higher price for profit. Individual clients have a high bargaining power primarily because they are able to switch footwear brands easily based on various factors such as style, design, pricing, and even S/Q ratings. Likewise, wholesale retailers have a high bargaining power because they could decide to sale more of their own private labels and less of our company’s products in order to boost their profitability, and/or widen their partnership with other footwear manufacturing firms that compete with our firm. Threat of Substitutes, Medium: there are various substitute footwear products including counterfeit ones. However, their threat is moderate and do not have a significant force against Company E.

3.3       Opportunities and Threats

Our company faces a few opportunities in the external macro-environment. The first one is the adoption of technology for improving the production process at our company’s factories. This will help to reduce cases of human errors made during the shoe manufacturing process. The second opportunity is the potential for a lasting growth in sales considering that athletic shoes for sports activities, casual wear, and leisure wear are becoming more and more popular amongst teens, children, and grownups. Their popularity is growing because these types of shoes are considered to be more comfortable and convenient than other types of shoes, for instance official shoes or boots, and are less expensive too. Also, athletic shoes are very appealing to people who mostly spend their time walking or standing, as well as to the elderly with foot problems. For Years 11, 12, 13, 14 and 15, the combined effect of these factors is projected to bring about a 7% – 9% annual growth in demand for athletic footwear globally.    Our firm also faces a number of threats in its macro-environment. Firstly, changes in tariffs and exchange rates pose a major threat, and may eat into the company’s profitability derived from overseas. Secondly, growing competition from other footwear companies also presents a threat. The competitors may adversely impact our firm’s market share.

4.0       Company Overview: Company E

Company E is an athletic footwear corporation that has 2 manufacturing plants located in North America and the Asia-Pacific regions. The factory in North America produces a maximum of 2 million pairs of athletic shoes per year, whereas the one in Asia-Pacific produces 4 million pairs of shoes annually. Vision of Company E The vision is to be an international company that is both environmentally and socially responsible, monetarily rewarding to the shareholders and staffs, and embraces diversity and creativity. To be committed to delivering exceptional fiscal results every year. Mission of Company E The mission is to be a leader internationally in the footwear industry with products designed for leisure and a passion for a sporting lifestyle and sports in general. The firm is dedicated to strengthen its products and brands continuously so as to improve its competitive position. Our company operates in North America, Asia-Pacific, Europe-Africa, and Latin America. There are 4 to 12 competitors in the global footwear industry currently. The competitive positioning per product type for the North America geographic region is best product in terms of design; for the Asia-Pacific geographic region is best product in terms of style; for the Europe-Africa geographic region is best product in terms of performance; and for the Latin America geographic region is best product in terms of quality and packaging.

4.1       Potential Strengths and Weaknesses

The potential strengths are as follows: availability of the product in many retail outlets; a variety of models offered; as well as strong brand name globally. In addition, our firm has low costs of product manufacturing, a strong fiscal position, sells in various channels including online to individual clients, wholesale to various independent retailers, and private sales to large multi-outlet retailers. The potential weaknesses are as follows: does not offer free shipping to customers who buy online; bad S/Q ratings; lack of celebrity appeal; and high reject rates on pairs of shoes produced owing to errors made by workers.

5.0       Decisions Made

Decisions Made in Y11 The key decisions made for Year 11 are: maintaining a large number of models availability in North America; and maintaining a large number of retail outlets utilized in the wholesale segment (Appendix A). The decisions were made in a highly competitive environment wherein the competitors were decreasing the number of models available and their number of retail outlets utilized. The results our company was hoping include gaining new customers and retaining current ones, achieve increased revenues, and gain market share. The demand went up from 1,282 pairs sold in Year 10 to 1,369 in Year 11 for the wholesale segment in North America. Also, there was an increase in market share from 12.5% in Year 10 to 19.2% in Year 11. However, the investors’ expectations were not met since stock price, return on equity (RoE), and earnings per share declined in comparison to Year 10 (Appendix F). Our company performed better than the competitors in terms of the number of pairs sold in Year 11 in North America. Moreover, at 19.2%, it had the largest market share within the North America region. Decisions Made in Y12 The key decisions made for Year 12 are: having the largest number of retail outlets utilized than rival companies within the Latin America region (Appendix B). In Year 11, our company had 1,500 retail outlets utilized in Latin America which was decreased to some extent to 1,405 in Year 12. Even though this number decreased, it is a relatively small reduction since our rivals decreased their number of retail outlets by a large number and our company was the footwear firm with the most retail outlets utilized. This decision was made for the purpose of increasing sales and improving market share of our firm in South America. With these decisions, our company was expecting to acquire new clients, achieve increased sales, and gain market share in Latin America. According to the actual results, our company’s market share in Latin America reduced to some extent from 15.0% in Year 11 to 14.7% in...