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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.

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.

Competitive Advantage- Raising the Bar

In a fast changing world it’s important for a company to develop strong foundations that will maximize profit, and create a powerful market position. In order to do so it has to create a competitive advantage in its field. Being the first entrant into the market with well developed business plan can create a great competitive advantage for a company. As for that I choose to write on IKEA which back in 1951 offer a completely new concept, well designed product in low prices. ‘We will achieve the IKEA vision by offering a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.’ Anders Dahlvig, President, IKEA. IKEA was the first company to do so, and by doing so it create a new shopping experience. IKEA use it strength to expand the business around the globe, and it did so in very impressive way.

Financial Highlights
Fiscal Year End: August
Revenue (2007): 27017.10 M
Revenue Growth (1 yr): 21.70%
Employees (2007): 118,000
Employee Growth (1 yr): 13.50%

*Taken from Yahoo Finance.

Companies can create a competitive advantage by having large market share. A strong market position can give a company the ability to control who to work with in order to get the lowest price, and/ or the best products. Moreover it can provide its customers with variety of products and services. A good example for that will be Wal-Mart with their slogan:

I decided to let the numbers talk, and show the meaning of major market share company. In an article taken from Business Week magazine about Wal-Mart I found these fascinating facts that emphasis how big it market share. With $245 billion in revenues in 2002, Wal-Mart is the world's largest company.” In home products such as toothpaste, shampoo, and paper towels, the company commands about 30% of the U.S. market and analysts predict that its share of many such goods could hit 50% before decade's end. Wal-Mart also is Hollywood's biggest outlet, accounting for 15% to 20% of all sales of CDs, videos, and DVDs. The mega-retailer did not add magazines to its mix until the mid-1990s, but it now makes 15% of all single-copy sales in the U.S. this numbers are only the tip of the iceberg in this megastore company that shows every day the power of market position.

An Interview with Michael E. Porter- Harvard Business School

Assessing Industry Attractiveness: Porter's 5 Forces

Porter’s five forces model is a great tool to determine industry attractiveness. The use of this model makes companies to step back, and see what is important. By stepping back and using the five forces, a company can get a broader view about what is significant to know on the industry they are in. The main thing in the five forces is to know where the power lies in the industry. This tool will become more effective by help knowing the strength of the competitors, and the strength of the position in which the company would like to move to. This tool can also help to take advantage in some situations, and improve weakness in others. The effectiveness of the five forces is not only on how to drive the company, but it also uses strategic planning for future products, and new rivals which is very important component in the market’s competition.

The Soft Drinks Industry Attractiveness- Porter’s Five Forces

Threats of entry posed by new or potential competitors:
Pepsi, and Coca Cola are controlling the industry, and the entry is difficult for reasons of the size and strong brand identity that this two main players have in the market. Bottling will be another barrier to entry since it requires capital investment, which might prevent entry.
Attractiveness level-Low

Rivalry among existing firms:
Pepsi and Coca Cola are controlling more than 70% of the industry in the U.S, and the top six controls about 90% of the market. Therefore the rivalry is less than if there were many small or equal size players in the market. Pepsi and Coke focusing more on rivalry in advertising, promotion and new products, rather than price since their buyers are characterize as brand loyal.
Attractiveness level- Medium
Bargaining power of suppliers:
Suppliers have little power over the industry, since the input of the biggest players in the market is primarily sugar, cans, and bottles. Sugar can be purchase easily in the market, and some times when sugar price is increase a sweet corn can be a cheap substitute. Aluminum is inexpensive material, and there are many suppliers that compete for a contract, therefore can dealers also have little supplier bargaining power.
Attractiveness level-LOW
Bargaining power of buyers:
In this industry consumers are brand- loyal, and in most cases they don’t base their purchase choice on price. Moreover, the stores see the soft drink industry as one that generates consumer traffic to the store, and therefore they find themselves obligate to hold variety of products from both Pepsi and Coke. The leading power buyer of this industry among all is the fast food network which buys in very low prices from Pepsi and Coke. By doing so Pepsi and Coke are trying to build brand recognition and loyalty, and use this avenue as an important channel to the customers through the fast food chains.
Attractiveness level-Low/ Medium
Closeness of substitute products:
Soft Drinks are unique and other drinks such as water and juices do not have the same taste, but they do have in common similar refreshing qualities that might make them a suitable substitute. Hot drinks and alcohol can’t be a substitute to soft drinks since they are not desirable or proper to the time when soft drink is needed.
Attractiveness level-Low/ Medium

By using the five forces analysis I will recap and say that the soft drink industry is profitable for the exiting firms. New firms will find it hard and in most times unprofitable market to go in.

Mission Statement by Microsoft- Youtube video