The Successful Strategies of Playing a Cesim Game - Case Study Example

BUS-620 Capstone Course: Global Business Strategy MSIB 4 Lessons Learned from Cesim Game i Navy “Be Different” Instructor: Prepared By: Sublimation Date: 17thMay. 2014 Playing a Cesim Game is similar to running a real business; it summarizes every single detail in running a real business such as the decision strategy, finance, marketing, R&D, and investments. This paper is a summary of what we learnt by playing the Cesim game; our strategies in each round, some of the mistakes that we did, and the successful strategies that were applied by our direct competitors. Our team, i navy, strategy was to set competitive and reasonable prices as long as it covered the unit cost. In addition, the group was to add high features in each round in order to keep up with the latest technology. At the beginning of each round, we studied the market by reading the market conditions, which include information regarding demand, cost, and finance. To determine the market demand, we had to study the market conditions especially the demand section, as well as the network coverage forecast. The Network coverage forecast represents the attractive Tech in each region and in each round. For instance, Tech 1 is the preferred Tech in all regions, and this is why its manufacture was continued from the first Round to the final Round. The competitors’ performance is the most important aspect because their actions affect us either directly or indirectly. Our direct competitors were Yellow & High Tech, and we had to be alert on their actions while making our decisions. In the production decisions we had to manufacture Techs according to demands forecast for each Tech and for each region. There are several decisions that should be taken while manufacturing Techs: how many units to manufacture in-house, the percentage to be allocated for each Tech and in each region, and how many units to use in outsourcing manufacture. In-house manufacture is usually cheaper than out-sourced manufacture. However, it does not mean that outsourcing is costly all the time. For example, in round 6, the outsourcing cost in Asia was very low as compared to other regions. There is a maximum unit for outsourcing and in order to cover different region demands, all of them have to be considered. For instance, in outsourcing we have to use the maximum number of units and we need to allocate them very well according to market demand and unit cost. Finally, we have to keep in mind several aspects such as the units to produce according to market demand, avoiding unsatisfied demand by trying to minimize it into zero, and avoiding cutting production levels. One of the big mistakes that we did was not invest much in building new plants in the USA and Asia. The most important decision should be to invest more in plants in the first 3 rounds in order to get positive results in the last two rounds. For instance, in the USA we have 12 plants, and in the first round we invested in building two new plants in the USA and two other plants in Asia. Building the two plants in the USA would cost USD 280,000 compared to USD 320,000 in Asia. In Round three we built three more plants in Asia, which cost USD 480,000. Building plants help the firm to maximize their production; the capacity for each plant is 550 units. However, since building plants is a costly adventure, we had to avoid investing too much in building more plants. However, our competitors exceed us in building more plants in both regions and they were able to produce more products than us in the final rounds. The total plants that we have are 19; 14 in US and 5 in Asia. However, our direct competitors have more plants than us. For example, the Yellow team has 19 plants in the USA and 9 plants in Asia. The other competitor High Tech has 12 plants in the US and 11 plants in Asia. In the last two rounds, we tried our best to manufacture more Techs but we could not achieve this because of insufficient production capacity. R&D and product development is another important aspect that enables the Techs to keep up with technological advancements. It can be done either through in-house development, which is a cheaper method, or by buying licenses. However, investing in in-house R&D has an advantage as you are able to utilize it in the next round. On the other hand, buying licenses means you can only use it in one round. Studying and analyzing the market demand helps in predicting the preferred Tech in the next Round and in which region. Therefore, it is important to plan for in-house R&D to avoid buying expensive licenses. We bought licenses in 4 Rounds, even though we still used in-house R&D. In Round 1, the license for Tec1 with one feature costs $ 55,000, and for Tech 2 with one feature costs $150,000. In summary, we bought licenses for Rounds 1, 2, 3 and 5 and it was a costly undertaking. However, we were forced to resort to this method in order to rival our direct competitors, High Tech and Yellow, who already had licenses. In marketing, we set our prices lower than our competitors and the strategy was to set competitive and reasonable prices as long as it covered unit costs. In the Final Round we have the second largest global market share after Yellow, which is 18.31 %. Although setting prices lower than competitors can enable a firm to gain a significant market share, sometimes the competitors can experience huge sales, even when both firms have the same number of features. There are several factors that affect the numbers of unit sold. These include investing in building more plants and investing in promotional campaigns. Each time we lunched a new product, we had to invest in promotions in order to increase sales. However, in order to reduce promotion cost, we reduced the cost of promoting Tech 1 in all regions. Several aspects should be taken in setting distribution priorities. These include determining which Tech has a high demand and in which region, evaluating logistics cost, tariff, and taxation. For example, our first priority in Round 6 was the USA, followed by Asia, and finally Europe. The decision to choose the USA as our first priority was due to the fact that Tech 1 was from the USA and therefore, much of the logistics cost could be avoided. Financial decision is also a very important tool to be taken into account. Aspects such as liquidity, long-term debts, and dividends should be carefully considered. In the first two rounds, we had long-term debts but we paid all of them so as to avoid risks in the next rounds. In all the rounds, we transferred all the cash to the parent company in the USA but kept around two million dollars in Asia and Europe. In Round 6, we tried to satisfy our shareholders by paying them dividends, which amounted to $ 70,000. In conclusion, it is evident that playing the Cesim Game enables one to enjoy the real life experience of running a business by setting different business strategies. Our competitors played an active role in our team as their actions affected our decisions. Therefore, we had to follow their strategies in order to predict and set different strategies when necessary. Our team i Navy was ranked at 4th place and team performance was very stable. Our direct competitors were Yellow and High Tech. Team Yellow emerged the winner and each team was proud of their performance as they had learnt a lot from the process. Read More