BUSI 1324 Assignment: Managing Business Strategy Game Report

BUSINESS STRATEGY GAME REPORT
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Business Strategy Game Report
1.0 Introduction
First and foremost, I would like to thank you Professor for your guidance and valuable knowledge, we have been able to complete a useful simulation business strategy game. It is interesting, challenging with very important lessons and knowledge on marketing, financial analysis, business, production and other various aspects. It presented us with the opportunity to make decisions in regard to business strategy and any decision affects the company operations and other competing companies. This game has taught us a lot in addition to the guides and strategies that you provided us with.
At this point we are presenting a report of the game which you will present to the Board of Directors to demonstrate what we have done and reasons why we did it.
2.0 Competitive Strategy
At first the company utilized a differentiation strategy but due to various factors that necessitated us to adopt to market changes and demands we adopted a low-cost strategy to enlarge our market share (Boyne and Gould-Williams, 2003).
3.0 Industry Overview
In order to understand the environment which the athletic footwear industry operates, we need to conduct a PESTEL analysis.
3.0.1 Political
The footwear industry is all over the world meaning that it is being affected by various government policies depending on a country, therefore, the tariffs, duties, and taxes vary across the countries and regions. In North America, the policies seem too liberal as compared to other areas such as Europe and Latin America.
3.0.2 Economic
The footwear industry is affected by various financial factors such as foreign exchange rates, capital valuations, bank rates, stock market among others. Organizations cannot take any financial decisions if they ignore the above mentioned factors. Therefore, for company to gain and maintain a competitive advantage in the industry, it must be well versed with these factors.
3.0.3 Socio-Cultural
The footwear industry cannot produce products that meets the needs of a particular social or cultural group. Its products must be distinguished considering the age group or target market.
3.0.4 Technological
With the advancements being witnessed in the technological sector, it plays a significant role I all industries and the footwear is not an exception. Every company is striving to adopt the latest type of technology as an attempt of producing distinct products. Technology plays a significant role in production and marketing.
3.0.5 Environmental
Environmental issues have become critical in the current world and companies are concerned about the utilization of energy resources (Dixon, Scura, Carpenter and Sherman, 2014, p.17). The footwear industry is concerned about the recycling of useful materials to reduce production costs.
3.0.6 Location
The location of production plants is affects the overall costs per unit as well as its quality. Additionally, supply chain factors such as taxes and tariffs vary across locations.
3.1 Competitive Forces
Porter’s Five Forces of Competition can be used to establish the competitive nature of the athletic footwear industry in the global market.
3.1.1 Threat of New Entrants
The initial investment costs for a footwear company are high making it hard for new entrants enter the industry. Additionally, the setting up process is complex making scaring away new entrants. Therefore, the chances of new entrants are low.
3.1.2 Bargaining Power of Buyers
There are various organizations operating in this industry, thus customers have a variety of choices to choose from (E. Dobbs, 2014, p.36). However, some customers are loyal to a particular brand for a certain period of time. Provided that there are many suppliers, this factor can be considered to be of a higher risk level.
3.1.3 Bargaining Power of Suppliers
Since there is a higher demand for athletic footwear products and a high number of players in the industry, suppliers have the option changing brands because there are many manufactures operating in the industry. However, this can be considered as a moderate risk since suppliers do have commands in prices which they consider desirable in the market (E. Dobbs, 2014, p.37).
3.1.4 Threat of Substitute Products
Athletic footwear products are imitable and can be produced by locally. Therefore, due to the imitability aspect of the products, this factor can be considered to be high though they may not appeal a loyal customers.
3.1.5 Intensity Rivalry
The competitive nature in the industry is very high. All organizations in the industry are striving to increase their market share and provide quality products.
3.3 Opportunities and Threats
Our company has various opportunities such as emerging and underutilized markets in various regions such Africa-Europe and utilizing the e-marketing especially the social media platforms. This will enable us enlarge our market share.
The major threat facing the company is stiff competition from our main competitor G Company which utilizes various strategies such as the corporate social responsibility which have given them a competitive edge over us.
4.0 Company Overview
4.0.1 E Company Vision and Strategy
We set the vision for our company to be the leader in footwear industry by providing a variety of high quality products at reasonable prices. We adopted the high style and quality strategies as well variety models and competitive prices in the global market.4.0.2 Our Core Values
4.0.2.1 Quality
We always strive to create value by improving the quality of our products as an attempt of creating a good image and increasing the comfort of our customers. The Quality management has thought us a good lesson, even though we lead the market for few years and be at the top by year 19, there are various things we need to fix. Based on the analysis of earlier years, we made several wrong decisions such as upgrading factories in Options B and D. Instead we should have upgraded C based on the fact that we followed the S/Q strategy. However, despite these wrong decisions, we have performed relatively well from year 13 and managed to stay at the top of the game. Provided that we have more years, we expect to do better. To be precise, we upgraded factories in option A and D in N.A as well as B and D in A.P. This was done during the early years of 11 and 12, the possibilities of changing back are high if we know the strategy better.
4.0.2.2 Customer Oriented
For every organization to survive in the market or gain a competitive edge, it must be customer centered. For us, when we are making various decisions and strategies, our customers are the focus. We always strive to exceed their expectations and we acknowledge that this can be achieved when our strategy is customer oriented and strive to create quality products at affordable prices. Throughout the years we have provided different product models and done intensive marketing through advertising. Consequently, we have applied a range of prices that we consider are reasonable even though they are 14% compare to industry average.
4.0.2.3 Employees
Besides our customers, we could not have been existing were it not for our employees who drive the organization. Provided that they are the ones who run the company, we always strive to retain them and provide them with development opportunities to ensure not only organizational growth, but also individual growth. We acknowledge that employees are the primary key to quality and brand image thus we are committed to investing in our group.
4.0.2.4 Environment
With the current trends in the universe, the environment has become a major concern for all organizations and our company is not left behind on that course. Besides focusing on our customers, we have also emphasized on environmental concerns by ensuring that our operations do not cause any harm to the environment. We have invested in the Use of Recycled Packaging, Work Force Diversity Programs as well as Ethics Training.
4.0.2.5 Flexibility
Throughout the years, we have been striving to produce products that meets the needs of our customers bearing in mind that their needs keep on changing from time to time. On the other hand we always try to keep a high Retailer Support and keep high Margins.
4.0.3 Original Strategy
Initially, the E Company utilized a differentiation strategy, which differentiates it from it close competitors based on different attributes such models, advertising, brand endorsement, and the supply chain network (Ferreira, 2015). The company chose this strategy because it has the potentials of increasing the company’s market share and provided the company has a long term strategy of producing products in large scale, the company will have an advantage on production costs and improve its overall performance. As a company, we have noticed that producing high quality products creates value to customers, profits to the distributors and even job opportunities provided that the company continues to expand its operations. An expansion into foreign markets increases the profits of the company which satisfy the needs of the investors and increases its market share strengthening the brand’s image. Throughout the years, we had a plan of increasing various factors such earnings per share, stock prices, image rating as well as credit rating above the expectations of the investors.
Over the years the above strategy was followed especially from year 11-15 where we strived to provide customers with the best prices for value, maintain the best quality and keep the premium (14% above the average market price). However, our focus has been on investor expectations, increasing the return on equity or return on investment and improving the net profit. Additionally, we focused on other factors such as increasing our image ratings, credit ratings as well as earnings per share for stakeholders. Another factor that we focused on is to increase the stock price. This factor cannot be assessed until end year results. Credit ratings, earnings per share, image rating and other factors were continuously increased to create an environment for increasing the stock price over the years.
From year 11-15 a slight increase on prices was applied from 48, 50, 52, 54 and 56. This was to ensure that our price was 14% higher than the industry’s average. In addition, the prices were adjusted to ensure that we realize a 6-7 profit margin per pair. Consequently, we also focus on S/Q of High End to ensure that we get 1 star above the industry’s average rating. By the end of year 20, we believe that it can move up to 9-10 stars. However, after our poor performance in years 11-13, we noticed that we need a different but strong advertising strategy to increase our sales that is why we spend 150% of industry average on advertising campaigns (Fleisher and Bensoussan, 2015). Due to market growth anticipations because of the high end market strategy, we always upgrade our production plants and borrow funds to realize our expansion strategies especially the factory in A.P.
Analyzing years 11-15, we realize that there is much that could and need to be done to create a strong and long term strategy. First, we need to upgrade Option C factory in order to have more Style and Quality advantages in the market due to focusing on high end markets. Secondly, we need to build a new factory in L.A when the exchange rates are high. This could reduce shipping costs from A.P to L.A. This move will be to utilize the absence of tariffs between these areas.
Also, we have signed contracts with various celebrities slightly higher than the average, this has taken a lot of investments. Brand endorsement from top celebrities help in increasing product sales, which leads to a higher market share as well as improve the image rating.
Throughout the years, the margins on the internet market have been increasing and we have realized that it can increase our net profits by almost $5 million, where each pair of shoes can get more than $10 margin. This can be achieved by selling our products at lower prices than industry average on the internet to increase our sales as well as get a larger market share.
We also expand our operations as an attempt of getting a larger market share especially in Private Label market. However, we acknowledge that these Private Label markets are risky and tend to decline with time, but we still keep 10-20% of the average industry price in them. With this we are able to increase our market share, net profits, image rating and maintain a competitive edge over our rivals who are bidding too high.
5.0 Strategy Changes
During the early...