Business Simulation Game - Report Example

Individual Report on Business Simulation Game Company Claude Footwear Number: Lecturer: BUSINESS SIMULATION GAME Introduction Claude Footwear Company has been in existence for fifteen years now. Its business exploits have been somewhat good in the industry standards. Compared to its industry peers, our company has been performing very well in some areas but doing poorly in others, hence the decision a few years ago before my team joined the company. We were tasked with implementing a new strategic plan put in place by its board of directors on behalf of the shareholders who were demanding better performance results. My management team has been overseeing the strategic direction the company has been implementing for the last five years. Fruits are starting to bear for the few steps already covered though we still have a long way to go. Strategic management planning and implementation has been in place for the six years. Our work in the office has been to implement these plans for the last three years and into the future in order to realize the full implementation. The next three years will be about much to do with consolidating the gains made in the last three years in order to maintain the market dominance that we have gained since. There is still room for improvement in our market segment we are pursuing. In internet marketing for example, we are relatively doing well but there are still a number of companies ahead in terms of these segment sales volumes. The same is true in private label and wholesale where competition is very high. Competitive strategy Claude Footwear Company core business is the manufacturing of sports footwear. Our markets cover or divided into four geographical regions for ease of doing business; North America, Latin America, Asia-Pacific, and Europe-Africa. These geographic areas are covered and managed from divisional headquarters located in each. The world head office and manufacturing plant is located here in London United Kingdom. As part of the strategic plan in the future is to put up manufacturing plants in some of the regions if we consider that it might be a strategic low-cost measure. This could be implemented sooner in emerging markets in the Asia-Pacific region. Specialty footwear still could be a factor to consider in putting up those plans if you consider country or region specialty sports like long distance running in East Africa, short distance, baseball, basketball, and American football in the Americas and football in Europe. The company in the medium term is implementing, as mentioned earlier a strategic plan which include product innovation, new product lines, marketplace scope expansion, and diversification and differentiation. This is geared towards attaining the company’s mission and vision. The world is now an open marketplace with companies offering similar products and services making customers the king in choosing which product or service best satisfies his or her tastes and preferences. The onus is with us at Claude Footwear to develop and pursue a competitive edge which meets the customers’ needs better than our competitors. We are in the market to offer with what they want at competitive rates. We are competing in price, market segmentation focus and product differentiation while at the same time meeting shareholder satisfaction (Thomson & Baden-Fuller, 2010). We recognize that the market for footwear is more competitive than ever before despite the fact that it keeps growing year after year. Having a strategic direction is therefore, a necessity rather than being a preserve of the elite footwear manufacturer in trying to compete in the already crowded marketplace. Competition is becoming stiffer at what can be termed as unprecedented levels. Our company must be the leader irrespective of the current conditions. INDUSTRY OVERVIEW PESTEL ANALYSIS Political Our business is spread in four geographical regions covering the world; Latin America, North America, Asia-Pacific, and Europe-Africa. These regions and particular countries in the named geographical places can present an enormous challenge insurmountable by uniform or common strategy. The region’s political situations are unique meaning that different strategies have to be employing for each region or country. The countries have different accounting reporting policies often characterized by long verification alongside taxation laws and practices. Some countries’ tax rates are very high and erratic in changing. Trade laws internally and internationally are quite different, and some are volatile due to frequent and unforeseen government changes that make our business had to plan. We have experienced conflicts in some markets which impacted our trading activities in some countries negatively financially and labour (Whitehead, 2012). While in some regions policies are pro-business, in other areas some policies serve to curtail business. Pressure groups such as civil society and trade unions are complicating matters while making business registration processes more challenging. Social Lifestyles trends are changing faster than ever before meaning staying in a comfort zone is proving a challenge as tastes and preferences change. Fashion changes rapidly meaning that our company has to keep on innovating to keep up with the trends, meaning that costs might remain at manageable levels. Demographic features are quite different alongside religion, ethnicity/race, tradition and social beliefs. Markets segmentation has to counter these issues hence specialization for various markets has to be put into consideration alongside labour specialty. Laws, labour relations, advertising, branding, media coverage, and packaging have an impact on our social considerations (Whitehead, 2012). Corporate social responsibility is becoming another financial footprint often differing in regions and has an enormous impact on our financial bottom-line. Charitable contributions in less developed countries are somewhat a must from public and government pressure. We have pooled, though, such expenditures at one source account hoping that it will be sufficient as per our internal projections which are about $7 million. Economic The operating environment is different from region to region. North America and Europe developed. Asia-Pacific is characterized by rapid income improvement alongside Latin America though part of the populations is still very poor. Africa, on the other hand, is to a large percentage still underdeveloped, but some countries in the continent are experiencing fastest economic growths rates. Populations are joining the middle-class status, meaning that they are getting more disposable income to spend on sportswear often seen as luxury in some parts. We make a lot of sales in North America and Europe, and these other regions are improving as people become richer. Establishing manufacturing plants in some of these regions after economies of scale have been considered can be very beneficial to us. Labour costs are lower; production costs on raw materials and energy too, are relatively lower. Some of our sportswear can be manufactured in these regions and re-exported back to the west. This has a downside as we will be viewed as exporting jobs, taxes, and development hence denying our economy the much-needed lifeline after the 2007-09 financial crises (Whitehead, 2012). The covered regions still present a challenge to us. Trade policies are diverse, monetary issues are a challenge, interest rates and taxes differ. Some countries are facing international embargos and sanctions. Hyperinflation have characterised some while we are in office hence exchange rates are a quite a challenge. Technological Technology has presented to businesses a totally new operating environment very different from what it was a few decades ago. Internet is now a marketplace. Consumers request goods and services from the comfort of the houses or while on the move. Consumers, especially in the west, do not need brick and mortar for shops to buy. They just go to the internet, such for products, make enquiries online, choose the best according to tastes and preferences and pays online, to be delivered to his/her place of choice. Developing countries are too adapting fast. Our company has invested in online business by selling and advertising through the internet (Myerson, 2007). Our industry too, is facing other technology challenges with an impact on day to day operations, hence financial consequences. Production plant requires constant review to ensure that the latest technology is used to keep with high levels of efficiency to keep production costs low. Our company has to invest in energy efficient technology. Renewable energy sources are other worthy investments that part of modern technology. Legal Our company operates in diverse legal environments around the regions covered. The company has to comply with laws of each country that it operates in order to do business. Countries with common law regimes like UK and USA favours an approach characterized by less intervention hence suporting shareholder interests. Such countries tend to have favourable taxation and business policies hence very attractive to us. On the other hand, some of our markets portent challenging business environment characterised with inconsistent tax policies, labour laws and legal environment. They sometimes are erratic as to disrupt business operations. Environmental Environmental issues are part of our considerations that we must adhere to as part of our business health concern. Environmental concern is providing a framework in which business must operate within in order to reduce the impact on the business locality. Such issues include minimum or no waste, emissions, and sustainable raw materials. We accept that waste does occur during the manufacturing process, but we try as much as possible to recycle what would have been wastage. We dispense in an environmentally friendly way the unrecyclable waste by giving for free to other manufacturers who use it as raw materials. Emissions are generated to air, water and even to the soil. We place screens, though, over smoke stacks, filter waste water and other process aimed at reducing as much as possible, the effect of such wastes. We have invested to a large extent to energy efficient machinery and green energy consumption. New regulations always come up in countries that we operate in and we try as much as possible to comply and even do more we can. All these activities impact in our bottom lines but the cost of not taking precautions to the larger society is worse (Gallagher, & Weinthal, 2012). Industry life cycle analysis An industry has to go through a life cycle phases of growth from infancy to maturity. They include production and, or market introduction, growth, and finally maturity and/stability phase. These stages mean that different decisions and strategies have to be put in place unique to each stage depending on firm-specific characteristics. In our industry, I would say we are at the last phase; maturity. This is because survival in the kind of manufacturing we are in will depend on competitive advantages since there is already stiff competition. For example, all metrics observed, our company is performing at the near industry average across all market regions. In North America, our company (C) market share in internet market segment stood at 7.4%, while the other were A-14.9%, B-14.3%, D-26.2%, E-14.4% and F,G & H all with 7.6% in the year 15. In wholesale segment our company controlled 15.1% while others were A-10.8%, B-12.5%, D-18.7%, E-11.7%, and F, G & H were all at 10.4%. Lastly, on private label segment, our company controlled 18.8%, while A-18.3%, B-0.0%, D-28.1%, E-0.0%, and F, G & H all controlled 11.6%. From these data, company D comes out as the strongest in sales in the industry. Compared to other three regions, the same trend is observed. This will be discussed later in more detail. Porter’s five forces COMPANY OVERVIEW SWOT ANALYSIS Figure 2: Source; Hellman, 2014 COMPANY DECISIONS Our company has been implementing strategic plans when we took over in year 10. The plans have been implemented from year 11-13 and year 14-16. Year 11 Objective Strategic action Outcome Improve product offering in private label Increase the number of pairs sold Sold more pairs across all regions (see Market Snapshot table 1,2,3 & 4 in the Appendix) Prices per pair in two market segments-internet and wholesale Increase price per pair to improve our bottom line across all markets -Earnings per share increased from $2.5 to $5 (See table 5 in the Appendix) - Remarkable revenues and profitability across all regions ( See table 6 Appendix-Income statement Year 11) Increase advertising budget Increase the expenditure in advertisement Increased sales across all market segments in all regions (See table 1, 2, 3 & 4 in the Appendix) In year 10 we decided to increase product offering in private which resulted outstanding performance across all regions. We decided all to increase prices per pair on internet and wholesale. It resulted in increasing the company revenue, hence earnings per share. Sales too increased due to advertising budget increase. Year 12 Objective Strategic Action Outcome Celebrity appeal Improve celebrity appeal across all regions The number of celebrity endorsements was huge considering it is the first year to do such a thing (See table 7, 8, 9 & 10 in the Appendix-Market Snapshot). Retain advertising budget Allocate the same amount in the budget as year 11 The number of sales increased in this year as compared to previous years (See table 7, 8, 9 & 10 in the Appendix-Market Snapshot). Celebrity endorsement is one of the major modes by which a company can use to improve its product appeal out there. Implementing such a programme can see sales soar due to celebrity names. Advertising, on the other hand, ensures that markets never reached before can be brought into the company books while retaining the already covered. Year 13 Objective Strategic Action Outcome Increase retailer support All budgets across all regions to be increased Sales(Wholesale) were increased remarkably across all regions (See table 11, 12, 13 & 14, Market Snapshot Year 13) Increase celebrity appeal The number of celebrity appeals was increased tremendously across all markets The number was more than doubled in year 13 as compared to year 12 (See table 11, 12, 13 & 14, Market Snapshot Year 13). Advertisement increase The budget was increased across all markets There was an increase in sales wholesale segment across all regions in all market segments (See table 11, 12, 13 & 14, Market Snapshot Year 13) Product differentiation Models offered increase The number of models to be offered was increased to meet particular needs by each customer (See table 11, 12, 13 & 14, Market Snapshot Year 13) Retailer support is a strategic tool we are using in order to respond to their needs. Spending in this area has to improve in order to realize more sales. Celebrity appeal too is another tool to reach more customers owing to endorsement and resultant increased identification with the celebrity. Advertisement budget also is needed when more markets are to be explored. Product differentiation leads to increase in the number of products available to each customer’s needs. Year 14 Objective Strategic Action Outcome Increase models and pairs We increased the number of models we were offering in this year -Across all markets Increase S/Q rating Improve our score in Game to Date Rating Our S/Q has been at 4-star for all the preceding years. This year’s score improved by a point to stand at 5-star or A+ in North America (see table 15 in the Appendix-Market Snapshot Year 14) Managing costs Rationalizing costs to realize more profits Increased our overall cash position hence improved earnings per share payout (see table 16 in the Appendix-Income statement Year 14). Improve investor expectation Almost scored all the points set out We were rated as no. 1 in investor expectation( See table 17 in the Appendix-Scoreboard) The market has not been fully exploited at least as per models sold this year. We increased the models and pairs, and they were all sold out. S/Q rating is an important tool used by the industry to rate company performance in meeting investor expectation alongside the customer. We managed costs in this year with the resulting improved in cash flow and hence a better looking balance sheet. Year 15 Objective Strategic Action Outcome Increase the number of retail outlets utilized The number was increased across all regions This resulted in more increased sales Improved CSR Increase CSR budget This resulted in improving our performance in CSR rating to stand at the second position in year 15 (See table 18 in the Appendix-Credit, CSR rating year 15) During this year, the company increased the number whole and retail outlets in all regions leading to increased sales. Our performance on corporate social responsibility went a notch higher with an increased expenditure to pursue green initiative to protect the environment. We were rated at the end of the year are second best in the industry. This is an achievement we will hold dear. THE FINAL RESULTS Though we have invested a lot in making our company the best in the industry we have a real competitor in company D. We have remained among the top performers nevertheless. All the financial reports alongside the number of units sold have been on an upward trend. We are working diligently to build on the gains made thus far. This shows that our health in terms of finances has been well in will maintain the same trend as we get into the future. We have remained the second best on average after Company D and rating clearly shows this trend up to and including non-core business ratings such as corporate social responsibility. Underlying Strategic principles As we implement the overall strategy, on the way we may divert to deal with emerging issues that affect the overall strategy. We have learned to adapt to new situations but keeping focus on the overall strategy. We have never been keeping with the trends to consolidate on the market share as it has been not consistent. Our sales in year 11 dropped significantly as compared to year 10, though it picked up in the succeeding years we experienced a slump in year 15. Our market share, therefore, followed the same trend. Overall, our earnings per share increased though not consistently. Key learning points about strategy We may be thinking that our overall strategy implementation in three years is too short but in essence it is the most adaptive strategy to deal with emerging issues along the way. A long-term implementation period can be very rigid to adapt to changes in the operating environment. As we take into account the influences that affect our company externally, the company key resources and competencies have to change and adapt through the learning process. The overall strategy is fundamental and remains a driving factor to keep the focus for the entire workforce of what needs to be achieved at the end of a financial year or the term of the strategy implementation. Strategy has to be influenced by the environment in which case the company operates in the industry. As we developed strategy we evaluated our performance and compared it with those available to us in the industry. This enabled to keep a realistic approach which was an adaptation of the market trends. KEEPING WITH THE OVERALL STRATEGY As we took over in year 10, we put in place a three-year strategy that we hoped it would be on the previous year’s successes but some of our key indicators in year 11 were less than satisfactory. The failure could be attributed to increase in the prices on our footwear and failure to adapt quickly to changes that occurred in that year. We did not change anything fundamentally as we were keeping focus with our over strategy though we slightly reviewed our prices downwards in order to attract back those customers we had lost during year 11. From the available indicators, we started building on previous year’s performance as we tried to adapt on emerging issues but overall there was remarked improvement as years passed. We might not achieve the number one spot in the next few years, but we are delighted to be the second best. We must keep benchmarking with the best in order to see where we are doing wrong or not doing anything at all to improve our performance (Spender, 2014). CONCLUSION We came in at the end of year ten and begun implementing a strategic plan running for three years. The plan was to improve on all indicators but year 11 returned what should be termed very poor in terms of sales. The year yielded mixed results in that though the sales plunged, the overall revenue was better than year 10. In the succeeding years we started building on product differentiation which was quite satisfactory overall. We see forward to being the best in the industry by beating company D to the first position by all benchmarks. Our three-year strategic plan is working well to our advantage as it ensures that it is short to adapt to emerging issues along the way. Long term strategic plans tend to be rigging in its response. Our last year in the current implementation face is year 16 will be another successful year according to our forecasts. Still company D will still be above us, we are learning a lot from it and in about six years time we think we will be able to beat it. We will be putting in place another set of strategies that will take us straight to number in those six years. References Gallagher, D, & Weinthal, E, 2012, “Business-state relations and the environment: the evolving role of corporate social responsibility”, in Steinberg, P., and VanDeveer, S., (eds), Comparative Environmental Politics, MIT, Boston. Myerson, J, M, 2007, RFID in the Supply Chain: A Guide to Selection and Implementation, Auerbach Publications, New York. Spender, J, 2014, Business Strategy: Managing Uncertainty, Opportunity, and Enterprise, Oxford University Press, Oxford, United Kingdom.   Thomson, N, & Baden-Fuller, C, 2010, Basic Strategy in Context: European Text and Cases, John Wiley & Son Ltd., West Sussex, United Kingdom. Trefis Team, 2013, “Nike through the lens of Porter’s five forces”, Trefis, 2nd December 2013, retrieved on 19th March 2015 http://www.trefis.com/stock/nke/articles/217421/marynike-through-the-lens-of-porters-five-forces/2013-12-02 Whitehead, R, 2012, “Olympic shame: Meet the Cambodian garment workers paid just £10 a week to make Adidas 2012 Games fanwear”, Daily Mail, 14th July, [online], retrieved on 18th March 2015 http://www.dailymail.co.uk/news/article-2173507/London-Olympics-2012-Cambodian-garment-workers-paid-just-10-week-make-branded-2012-Games-fanwear.html#ixzz26R5ECqOy Hellman, J, 2014, “NIKE: A Short SWOT Analysis”, Stocks, 10th March 2014, Online, retrieved on 20th March 2015 http://www.valueline.com/Stocks/Highlight.aspx?id=15623#.VQutq47Rpkg Read More