Business Strategy Simulation - Assignment Example

TITLE: Business strategy simulation report Date: December 7, 2008. Question No. 1: What was the initial strategic direction chosen for the firm and why was this chosen? Initially the firm has selected a strategy to concentrate on the launch of new family class Allure product with the size of 36 and alpha family class products with the size of 28. The rational behind the selection of these products was to attract the costumers through the introduction of these two new products in the market. The cost of allure family class is much higher than that of the alpha class. The company has invested $ 327 million on the safety of the product and the other areas like interior, styling and quality were completely neglected as during the initial period of the product there was a need to satisfy the customers through the insurance of the safety concerns. On the improvement of technology capabilities the total expenditures remained up to $327 million indicating that the total expenditures were revolving around the safety aspects of the products. The position has been explained in the table 1 below Table 1: Technology capabilities: Current Expenditures ( Millions ) Interior = $ 0 Styling =$0 Safety = $327 Quality = $0 During the initial period the company has adopted a strategy to address the consumer market through a marketing campaign as the company has invested US $ 50 million as $ 40 million for Regional Corporation Adv., $ 2million for direct mail and eight million through public relations. As the products were launched during thins period therefore an amount of $50 millio0n was invested to improve public relations through consumer marketing. Marketing of the product at the grass roots level is an essential tool to attract the costumers to the products. The company has maintained its marketing strategy for the sale of vehicles belonging to the category of Ace, Alec and Alfa. The maximum retail price for Alfa products was at the top of the list with MSRP $20,350 and the minimum price was that of Alec that is $ 11492. The brands of the vehicles, MSRP and discount extended to the dealers are given in the form of table 2 and a graph, respectively. The current expenditures of US $ 531 million are mainly focused for the vehicle Allure that is 78.3 % of the total current expenditures reserved for the project development. The primary focus of the company is towards the promotion of the vehicle through exploring the consumers market. The dealership was only restricted in the south zone. In the same period the company had paid a dividend of hundred million US $ to the shareholders for gaining the confidence of the shareholders as well as of the general masses towards the company’s performance. Question: 2 What decisions were made during the course of the simulation and why were these taken? During the course of the simulation the company has taken the following decisions, rational for each decision is as under: a. Improvement in technology capabilities The company has decided to improve the interior of the vehicles with a total expenditure of US $ 156.00 million to attract the customers with internally decorated vehicle. Styling, safety and the quality factors were maintained at their previous levels. The position can be explained with the help of the table 3 below: Technology capabilities Current expenditures (million US $) Interior styling safety quality total 156.00 00 00 00 156.00 b. Up gradation of the vehicles Allure and alfa as family class vehicles The company has up graded the vehicles Allure and alfa as the family class vehicles, up graded the models and launched them in the market. A total expenditure of US $479 million was incurred under this head. The rational for launching these two products in the market was to attract the customers, increase in profitability through the launch of the product with a focus on the improvement of the models. Major chunk of the current expenditure was tilted toward Allure with a current expenditure of US $ 364 million. c. Investment in consumers marketing The company has decided for consumer marketing for the product with a total investment of 69 million US $, the investment level has increased by US $ 19 million from the figures of period 2 where the total expenditures were remained US $ 50 million. A comparison of the consumer marketing in period 2 and period three is given as under Consumer Marketing Budget (millions) Serial no. Details period 1 Period 2 Difference if any 1 Regional corp. adv. 40.00$ 51.00$ 11.00$ 2 Direct mail 2.00$ 8.00$ 6.00$ 3 Public relations 8.00$ 10.00$ 2.00$ 4 total 50.00$ 69.00$ 19.00$ The above table indicates that the company has emphasized on the consumer marketing with a focus on regional corporation advertisement with an enhanced investment of $11.00 million. The total enhancement is US $ 19.00 million. The company through direct mail has approached to the value seekers, families and high income group, the group was not approached during the period 2 of the implementation phase of the company d. A change in the marketing strategy with new products The total range of company’s products was consisting of 4 products as Ace, Alec, Alfa, and Allure. The products as Alfa and Allure were introduced in there up graded form; moreover the price of MSRP of the vehicle Alec was reduced from $11492 to $11299 to attract more customers of the company’s products. e. Increase in the vehicles production Previously the company’s sales were at the level of 987 thousands with an increased and enhanced capacity of 220 thousands units, the company has fixed a target of 1214 thousands units to meet the needs of the newly launched company’s strategy The company has focused on training and support of its dealerships with an expenditure of $12 million. The company has increased the level of dividends paid to the share holders to the level of 150 million $ from the previous level of hundred millions. Question: 3 How closely did the decisions your firm take match your initial strategic direction? Was it possible to stick to the strategic direction chosen? The decisions taken by the foreign are matching with the initial strategic direction determined by the company for ensuring its sustainability and growth of the company during 4th period no investment was made in enhancing technological capabilities and consumers marketing. However, in the product development sector the company has launched an Ace truck in its upgraded form with a current expenditure of $ 270 million. The step taken by the company is a slight shift from the previous strategy as to focus on the product Alfa and Allure. The advertisement of Alec and Allure has slightly been changed to ensure their acceptability and marketing in the market. A vehicle sale level has gone up from the previous level of 987 thousands units to the current 1148 thousand units with an increase of 161 thousand units the trend indicates the results of the marketing campaign and production level. However, the company has issued bonds of US $ 75 million for attracting more funds as to meet the growing demands for the maintenance of enhanced production level. - Question: 4. What were the final results of the simulation exercise and how did these results arise from the decisions taken? The final results of the simulation exercise for the product development for Allure was with a size of 38 as compared to that of the size 36 originally forecasted with the current expenditure of 264 million $. These expenditures are less than 100 million than that of the projected expenditures level of 364 million. Similarly the specifications of Ace truck with a size of 70 remained with in its boundaries. However, there is change in the quality level from 1 to 2 and low current expenditures from the previous 270 million $ to the current 242 million. The results in the consumer marketing field had surpassed its forecasted level of 69 million $ to 82 million $. The increase in the consumer marketing has observed in all the sub sectors of its expenditures. The results are indicating aggressive marketing strategy as adopted by the company. An up graded version of Ace has been added with enhanced quality. The dealer’s discount for the product Alec does not match the original forecasted level as per discount of 12.0% was granted to introduce the product in the market through giving incentives to the dealers. No change in the plants capacity has been fond as the level remained to 1220 thousands units. The company has issued bonds of 75 million $ at the rate of 4.5% for a period of two years. In the nut shell the final results of the simulation exercise are approximately in conformity with the decisions taken by the company. Question: 5. What underlying strategic principles were evident in the results and process of the simulation? I.e. what kinds of outcomes arose from decisions you made and strategies you adopted? The underlying principles which are evident in the results and the process of the simulation include launch of up graded products as Alfa, Allure and Ace, adoption of consumer marketing strategy to attract the customers for ensuring the growth and acceptability of the product enhancing the production capacity and issuance of bonds. The decisions were taken to introduce the new products in the market to meet the needs of the customers and to ensure the sustainability of the company. The company has issued bonds for 100 million $ to meet the financial needs of the company. All the results are in line with the company’s target. These results are indicating that the strategies of the company are in line with the over all objectives and targets as decided by the company. The model adopted by the company proved to be successful and is in a position for its replication with slight and necessary modifications by any other similar companies (1). The results as achieved through the implementation of the strategies include the introduction and acceptance of the new products in the market, aggressive marketing strategy as a tool to familiarize the products in the market and the generation of necessary funds with the issuance of bonds to generate required funds for meeting the financial needs of the companies. All these measures have proved to be successful in favor of the company (2). Question: 6. What did the simulation reveal about business strategy? The simulation revealed that for successful execution of the business a number of marketing tools both business and promotional tools are necessary for successful execution of the businesses these tools range from the adoption of marketing campaign tot the issuance of bonds. A set of decisions are necessary to implement and execute these tools for running the businesses. The management and the leadership are the think tanks for taking strategic decisions in favor of the company. These decisions are implemented by the executors with their determination and the utilization of technological input. The companies are determining their production targets keeping in view the market trends and future strategies of the company. The introductions of new brands or up gradation of the existing brands are timely interventions and are necessary for ensuring the sustainability and existence of the company in its respective field (3). The companies who are unable to meet these challenges become obsolete with the passage of time. Marketing of the products is a growing tool and the exercise of the strategy leads the products to the door steps of the consumers. The use of e marketing, e business techniques and print and electronic media are the emerging sub fields in the major fields of marketing. The incentives offered to the dealers in the form of discount are for making an aggressive marketing technique to watch the interests of all the stake holders including that of the dealers .It is expected that the strategy as adopted by the company will serve as a model business strategy for other companies to adopt the same for ensuring their profitability, growth and sustainability as per their missions. REFERENCES: 1. Curt Tausky, Work Organizations: Major Theoretical Perspectives (Itasca, lII,:F.E. Peacock, 1978), 42. 2. Jeffrey Pfeffer, “Producing Sustainable Competitive Advantage through the Effective Management of People,” Academy of Management Executive 9, no.1 (1995), 55-69. 3. PMI Standards Committee, Guide to the Project Management body of Knowledge (Newton Square, PA: Project Management Institute 2000) Read More