Wednesday, May 21, 2008

What we brought to the table? Last Words- Strategic Assessment of Simulation

As a group, our major goal at the beginning of the simulation was to identify what is our mission statement. We all agreed that the main mission will be to maximize profit while creating quality product to our consumers. We believed that with this plan we would be able to strike some other factors in the simulation such as enlarging our stock price, and increase our market share. During the establishment of our mission we were thinking about our stakeholders as undividable part of our strategy, hence they should all benefit from our profits and products. With that in mind we identified our stakeholders as our employees in the production line, sales persons, and management, along with our consumers and shareholders. During the simulation it was important to try and satisfy all sides as part of our strategy. We tried to provide our employees with competitive salaries and commissions, satisfy our consumers demand for quality product, and provide our shareholders with returns for their investment. Taking all of that in mind to the simulation we tried to provide the best respond to the market.

Referring to the external analysis and porter’s five forces, this simulation was kind of different from other industries we discussed about in class for couple of reasons. The first reason is that we were in a “close market” with seven teams only, and no opportunity for new competitors to join the market, therefore low or no attractiveness for new competitors. Another unique aspect was that there were no substitute products in the market, so again all seven companies sold the same products. The bargaining power of consumers was highly attractive since they had the opportunity to buy the same product from seven different companies. The bargaining power of supplier was low, and it was up to the company to do the right calculations. Competitive rivalry was medium with seven companies that seek to increase market share and increase sales. By using the porter’s five forces model we thought that in general this industry is medium- high attractive level for us as accompany to stake claim in the first stages of the competition.


All companies at the simulation stated from the same start point without any advantage on others. Overtime each company creates some kind of competitive advantage by using it unique strategy. Right at the beginning we decided to sell the products in area one, and not in area two due to the cost differences between the areas. We had some long meetings in which we decided about our strategy and short meetings when our strategy seemed in the right direction, and didn’t require too much of analysis. We wanted to create an advantage on others by using our resources in a smart way. We focused on how to produce more with less overtime and outsourcing. The bottom line was to create a great product at competitive price that will give us an advantage right at the beginning. In the course of the 8th quarter we more than doubled our production potential. At some point at the end of the first year we discussed the results and we came to decision to focus more on R&D, quality control, and advertising and less on production. At some point during the competition we figured out that we are too much self-centered in our decision making. It took us time to adapt some strategies from other teams’ performance results, and we paid for it in the 4th quarter in which we finished last. Our problem at that time was that we didn’t have a long term plan for our business, and from that point we tried to create a vision for the rest of the competition. When the result of the 6th quarter came we figured out that our strategy doesn’t work so well since we finished second from the last. We found out that our prices were below the market average. For the last call we tried to reinvent ourselves again. We put some less energy on attempts to catch- up, and we decided to increase advertising, and raising commissions in order to sell our product in the average market price. Moreover, we increased manufacturing so we could meet the growing demand. It worked but it wasn’t enough. We didn’t read the market right, we miscalculate some data, and the market backfired us for that. At the end we raised our prices and increased our inventory, by doing that we caused the demand for our product to decrease, and we got stuck with too much inventory.


As for our business and corporate level strategy we developed some strategies that we tried to pursue along the simulation. Right at the beginning we decided not to produce the second product since it won’t be profitable due to high costs, therefore along the entire simulation we remained with this decision. We had an idea to expend our business In a way that will give us maximum value at every quarter, we tried to do so by increasing the labor capacities in the two stages in a way that the output from each stage will be equal. In order to penetrate this new market we decided that price should be low at the beginning, with the ability to raise it when we will invest in quality control for example. To get the initial price we calculated the total cost per unit and added an amount that seemed in our discussions reasonable and profitable.


Last words- as a group we believed that our general direction was right (remember the ungraded first simulation…breaking records results) but we made too many mistakes along the way. Most of our mistakes were on the evaluated simulations (maybe we good in theory.) we didn’t go along the way with our strategy; we didn’t expand every quarter as planned. Moreover we played too much with the product price, and we tried to feet it other groups. We should have stick with our plan regarding the price, and not trying to copy others.


We have many points for improvements, and I personally learned a lot from this experience (Thanks god it wasn’t real money…) I emphasized earlier our important our consumers are, and one of our main mistakes was that we played too much with the product price, and for consumers it wasn't a good sign about our company. By that we conveyed a message to our consumers how unstable our decision making was. We were supposed to keep investing in expansion in order to lower labor cost. Last but not least, we didn’t bring anything new to the table, literally and this is a strategic problem that we were supposed to figure out after the second quarter.

Monday, May 5, 2008

NYC- MTA Strategic Problems

Company slow to introduce new products in a fast changing environment:

Such a symptom can be very critical to a company's preservation, as unlike other symptoms, this one can be clearly visible to the consumers. These consumers, set in a shifting and unpredictable environment, are constantly looking for new, more efficient products. Therefore, a company that fails to provide its potential consumers what they are looking for, will find itself in a strategic problem in the future. When new products are introduced by a company, the consumer feels assured that the company is interested in the market and its willingness to provide a better product. Hence, a company that fails to do so, sends the opposite message to the market, and primarily to its consumers.

Too much debt:

Although debt can be a major source of money, companies must know how to manage their debt in a way that won’t harm them in the future. Too much debt can cause damage if it doesn’t repay itself faster than it grows. This debt will undoubtedly grow into a strategic problem as it will prevent the company from self developing, as well as improving future progress to its consumers. Furthermore, excess debt can prevent the development of much needed new products, and consequently dissatisfy a customer's needs. This can be clearly proven with any number of companies, even the New York City MTA.



The N.Y.C – MTA has suffered for several years from a large budget gap which will lead to a projected deficit of $1.46* billion in 2009 (*New York Times). As a daily commuter, I can see and feel this strategic problem in several ways. First of all, many of NYC subway station are filthy and not well maintained due to lack of financial resources. Second, the recent hike in fares has dragged many consumer complaints. And third, the delayed completion of the Second Ave subway line. These are only a minute fraction of the many strategic problems caused by the MTA's deficit and due to lack of good management and discipline budget.