Note: Question number VII was missing from the handout posted on the Blackboard. We would like to know what was taken away from us.
I.
- Our mission was to serve as many customers possible at the lowest possible price.
II. Stakeholder Identification
- Our company is public is does not have any person with significant ownership in it. In the past, the last person that owned a relatively large percentage insisted on dividends payout thus hurting the development through lack of retained earnings.
- Bargaining power of suppliers: there were no suppliers really. There is a market for raw materials and all teams have the same prices.
- Bargaining power of customers: the customers had relatively good bargaining power since there were at least 7 teams and 1 importer to choose from. On the other side, I had the observation that teams kept raising prices, which meant that the pressure from customers was not of such high impact.
- Threat of new entrants: 0. Game was set, no one was coming in.
- Threat of substitute products: Since all teams were producing only 1 type of product (barely anyone produced P2) it makes sense to say that 2 factors affecting the substitution of products were price and quality. I did not see a tremendous power in changing to a lower price than everybody else, so I must say that quality must have played an important role. I would classify this as medium.
- Competitive rivalry within the industry. This is very high. There are 7 teams, 1 importer that continually undermined all prices and all of them were doing the exact same products thus creating a tremendous pressure and rivalry. Definitely very high.
Overall The industry seems attractive.
I did not notice any significant changes. The economic index kept staying high above the 100 with small fluctuations, which I guess resulted in decent salses. The price of the labor seemed that may have gone up, but it was somewhat impossible to tell for sure.
There are really limited options on developing competencies. There were generally 3 things we could play in. One was engineering study which I did not see much impact in production cost in terms of labor or materials needed so it must have played a role that was not easily trackable. Quality control and R&D were the other two options. Developing a competency was mostly in terms of improving the overall quality rather than having a specific niche. Our company decided to go the other way and produce cheap products with less innovation/quality, as a counter to what most of the other companies would do. There were no barriers to entry really since anyone could have done that. However, adapting in the sense of turning 180 was a bit difficult so to say since the game itself was very short compared to the time it takes to notice changes from all those three factors described atop.
- Our strategy was to create cheaper products and sell a lot. On a business level we tried to calculate the lowest costs and highest returns in different scenarios of production level.
- Although we got a B I would classify our performance of the company in a way as failure compared to the ambitions we had. A number of factors came together to be play for that final:
*) The biggest surprise and problem was that customers were not price sensitive. Right off the bat, that means we are doomed. It takes time to realize that unfortunately because you need at least few quarters to notice a tendency of price and sales, which is half the game.
*) Another problem was that economies of scale did not play well. Though it was expected that labor increases significantly, the prices of products continually was higher than what we could calculate. With the information given we did not seem to be able to get to the number labeled “UNIT MFG COST”
*) For quite an unknown reason the ROI was very low. Even when we decided to give up the huge quantities and decided to concentrate on the amount of units to be produced at cheapest ROI stayed well below the leaders, considering we were not heavily investing in quality improvement.
*) Dividends hardly seemed to affect stock price, that was quite surprising. We stopped paying large dividends after the first time when we realized that.
*) A number of small mistakes were made. One of them was that we forgot to upgrade the stage two capacity one time, which in delayed us in terms of production capacity, since we paid for increase on stage one, we got it, but we were still bottlenecked at stage 2.
*) We also produced product 2 in the very beginning, but it seemed that it neither had good margin nor wide market. That was only too bad that we were the first to figure this out.
- By now it seems obvious that going the safe way with this simulation is the way to win. Going slowly and with quality apparently seems to be a better choice. A lot of the connections between the different items on the simulation were not clear but they do play a role, and so we suffered by not going the standard way.
1 comment:
First of all, you've got a very sound mission statement, but you have missed a very important piece to cut your cost- which is to expand your firm's capacity. From the industry report, I believe you should be able to realize that COGS played a significant role since it counted for more than half of the toal Sales Revenue. To avoid make subcontract which cost 1.9 time more, your company should have expanded at the early stage as posible.
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