Strategic Assessment of Simulation - Firm 2

I. Mission Statement

At the beginning of the simulation, all firms were losing money and had a low sales volume. Therefore, our major mission of the simulation is to help the firm to earn profits by increase the sales volume and decreasing fixed cost, and at the same time retain stock holder's trust by improving the stock price.

II. Stakeholder Identification

During the simulation, there are many important stakeholder groups that we had take into consideration, such as employees, stock holders and suppliers. First, employees will affect the decision process of how many units can we produce because of the labor capacities. Moreover, we also have to consider how many sales representatives should we acquired and how much should we pay for them. These factors have a great impact on our expenses. Second, stock holders' trust is very important, too. Therefore, while we tried to operate the business effectively, we also want to increase our stock price to build trust from the stock holders. Lastly, power of the supplier also affected our strategy formulation. In order to avoid the high spot prices of the raw materials, we have to be aware of the material capacity all the time. If we don't have enough materials on hand, we would have to pay a higher price for the materials and that will certainly increase our expense.

III. External Analysis: Identification of Industry Opportunities and Threats

To identify an industry's attractiveness, we have to apply the porter's five forces. First, threats of new entrance of the dinnerware industry is low, because there is a high financial requirement for the production of dinner ware for machinery and labors. Second, threats of substitute product is medium because there are plastic and paper forks, plates and spoons. However these substitute products are more likely to be used in private family parties, but dinnerware are more likely to be used as gifts for holidays. Therefore, the motives of purchase and the usage of these products are different. Third, the bargaining power of suppliers is high, because there is only one supplier in the industry. Even if the supplier increased the price of raw materials, we still have to pay for it. Forth, the bargaining power of customers is medium to high, because they have many companies to choose from. And lastly, because there are many companies with similar sources and information in the industry, rivalry between competitors is high. From the analysis of porter's five forces, the industry is not attractive at this time.

During the simulation, we had expected economy down turn will have a negative effect on our sales, but the result came out to be opposite. In addition, the sales of each year were increasing. On the other hand, seasonality seems to be a factor that will affect our sales. For example, for both year 2005 and 2006, the third quarter had the greatest sales and the forth quarter had the least sales volume.

IV. Internal Analysis: Resources, Capabilities, Competencies, and Competitive Advantage

At the beginning of the simulation, all companies had similar resources and were in similar situation with low sales volume and limited capabilities. Therefore, our firm didn't seem to have any competitive advantage over other companies at start. Since no company is better than other, we tried to develop our competencies through different marketing strategies. For instance, we had developed a price strategy, increased capabilities, avoided of losing sales representatives and put money into research and development. All these factors had shown from result to be our competitive advantages over other competitors. Given that we had planned on every factors that will help us to shape the distinctive competencies, our company shown to be the best operating company in the first two quarters. Later on, when other companies became more familiar with the environment and adapted more experiences, the industry became more competitive. As a result, we started to lose the dominant position of the industry and we tried to adjust our strategies to regain our competencies.

V. Business, and Corporate-Level Strategy

For both the business and corporate level strategy, our big picture view of the organization is to focus on product 1's sales in both areas. Even, we had tried to sell product 2 in area 1, the result shown that product 2 is not so attractive at this point and the cost of production is very high. Thus, we decided not to produce too much of product 2, and we want to focus on the sales of product 1. For pricing strategy, we had implemented the 99-cents strategy and we tried to start as a premium product by pricing high. Another reason that we want to use premium pricing is to increase our profit margin. At the start of the simulation, our company were lack of labor and material capabilities, therefore, we paid a lot more on spot price of raw materials, and also overtime and subcontracting for labor. After the first quarter, we had realized low price is not attractive in the dinnerware industry, so we continued to increase our price between $52.99 to $59.99. Other than competitors with a wide range of price difference, we tried to keep it small within $50 to $60.

Other than price, we also offered compelling salaries and commissions to keep our sales representatives. We placed a great amount of money on advertising to attract more potential customers as well. We were concern about product development, so we contributed into research and development, too. Our other expenses included maintenances, expansion of capabilities, investments and dividends. All of these expenses were crucial to our success, and we were never regretted to pay on these activities. We had the money and we want to use them effectively.

VI. Performance Assessment

Our company started to be the dominant player, but later on other company such as firm 4 had caught up to compete with us. At the beginning, our company had a strong and clear vision of how to operate the business and implement strategies. Since we had started to be so successful, we lacked of the ability and space to implement different strategies. Even we tried to used different strategies, we only made a small change to avoid any negative impact on our business. At the last quarter of the simulation, even we lost our position of number one but we still tried to maintain as number two.

VII. Implementation of Strategic Change

If the simulation would be continued for additional periods, I would recommend to use forecasting for production. As I had mentioned before, seasonality had affected the forecast of sales. If we can properly produce the units of product we needed, that will help us to decrease expenses and we can use that money on investments and maintenances. Another problem that I would like to address on is the credit rating. Credit rating is a factor that shows the company's ability to pay back the liabilities. Our current credit rating is around 2.5, I think I would like to buy back our bonds to decrease our liabilities and make the cash and liabilities more balance.

Strategic Problems

There are many symptoms will indicate the strategic problems of a company. Some of these symptoms will have a great impact on the company's operation and future success. Examples of these symptoms are company slow to introduce new products and company does not have much product variety.

Some companies are so slow to introduce new products to the competitive market. The company exhibits this symptom shows that it is not competitive enough to survive in the industry, especially those companies involve in technological industries. Technology is changing so rapidly that most companies in technological industry are investing billions of money to develop new technologies. If the company is not able to introduce new product, it will lose its market share of the industry.

Another similar symptom that indicates a company contains some strategic problems is the company doesn't have much product variety compared to competition. The symptom indicates this company is not providing enough choices to its customers. Nowadays, the bargaining power of customers is increasing, if seller doesn't provide enough choices to customers, they can easily change to another seller.

It is hard for me to think of any company in current existing market that contains of these two symptoms. Companies contain these symptoms and still retain its market position are most likely to be the monopoly of the industry. Otherwise, companies consist of any of these symptoms are hard to survive in the market.

Business Strategies

Cost Leadership is achieved by an organization that is in a position to bring a product to market which offers the lowest price and ideally highest quality in a particular product or service segment. Many companies are using this strategy to gain market shares and compete with other competitors. Major objectives of the companies implementing cost leadership strategy are either gain market share or earn a higher profits than rivals.

Examples of Cost Leader companies : Nissan and Dell computers

Nissan - Nissan uses global deployment to lower it production costs, which makes its products less expensive than other car manufactures. Moreover, Nissan's promises competitive parts pricing is ensured through an elaborate Annual Parts Price Survey in collaboration with Principals. Therefore, customers are assured of the lowest cost of ownership.

Dell - Dell's mission statement has stated that the company is providing competitive price to its customers. Compare to other computer manufactures, Dell's computer is relatively lower than others. Most people will categorize Dell as the low price computer producer.

Differentiation involves creating a product that is perceived as unique. The unique features or benefits should provide superior value for the customer if this strategy is to be successful. Because customers see the product as unrivaled and unequaled, the price elasticity of demand tends to be reduced and customers tend to be more brand loyal. This can provide considerable insulation from competition.

Examples of Product/Service Differentiate companies: Dr. Pepper and Jenn-Air

Dr. Pepper - Dr. Pepper is a soda company that offers a regular soda, a diet soda, a decaffeinated soda, and a diet-decaffeinated soda all under the same brand name. Each type of soda is directed at a different segment of the soda market, and the full line of products available will help to establish the company's name in the soda category.

Jenn-Air - Jenn-Air differentiates by its features of different ranges. Jenn-Air appeals to customers as the "proud gourmet." The emphasis is design elegance and a contemporary aesthetic.

Porter's Five Competitive Forces - the digital camera industry

Analyzing Porter's Five Competitive Forces are useful to judge an industry's long-term attractiveness at a point of time. These five forces are rivalry among present competitors, threat of new entrants into the industry, the bargaining power of suppliers, the bargaining power of buyers, and the threat of substitute products. Moreover, Porter's Five Competitive Forces explains why some industries are more profitable than others. Analyzing an industry by using Porter's five competitive forces is the first step to do for the people who want to invest or enter the industry.

Do you think digital camera is attractive industry? Let's find out by conducting a simple Porter's Five Competitive Forces analysis on the digital camera industry.

1. Rivalry Among Present Competitors - Rivalry occurs among companies that product similar products and it is more likely to occur when one competitor tries to improve its standing. Therefore, the greater the competitive rivalry in an industry, the less attractive it is to current players or people who are planning to enter.

Digital Camera Industry - Rivalry is high because many well known brands such as Cannon, Sony, and Olympic are the dominant players of the industry. And these competitors are trying to differentiated their products through new features and functions. Rivalry is really unfavorable in the camera industry.

2. Threat of New Entrants - Threat occurs when competition is intense which means new competitors add capacity to the industry and bring the need to gain market share. Once again, the greater the threat of new entrants, the less will be an industry’s attractiveness.

Digital Camera Industry - Threat of new entrants is low. Since rapid pace of technological change, new entrants will need large amounts of financial support to do development and research. Therefore, threat of new entrants is low and it is favorable for the camera industry.

3. Bargaining Power of Suppliers - This determinant is exercised through increased prices or more complicate terms and conditions of sale. When there are limited of suppliers, this factor will be more crucial. Thus, the greater the bargaining power of the key suppliers to an industry, the less will be the overall attractiveness of the industry.

Digital Camera Industry - Supplier power is medium in the camera industry because number of suppliers are limited due to the fulfillment of government requirements for electronic products. Under this forces, camera industry is moderately unfavorable.

4. Bargaining Power of Buyers - This force is based on customers' efforts to look for reduced prices, improved product quality, and added services which all will affect competition within an industry. The industry will be less attractive when the greater the power of the customers served by an industry.

Digital Camera Industry - Buyer power is medium, which make the camera industry moderately unfavorable. Customers have many choices to choose from, so they can easily change their mind and buy camera from other competitors.

5. Threat of Substitute Products - Substitutes are alternative product types that perform almost the same functions as the original product. Substitute products are limiting the ability of the industry to charge the product and constrain the profit of an industry. Same as all other forces, when the threat of substitute products is high, the attractiveness of the industry will decrease.

Digital Camera Industry - Threat of substitutes is medium. Many people like to use cellphone as a photograph device because the photograph functions of cellphones are become more alike to actual digital camera. Lastly, threat of substitutes is moderately unfavorable to the industry.

Due to technology improvements and competitions between different competitors already exist in the industry, four out of five forces of the digital camera industry are unfavorable. Thus, the digital camera industry is not attractive at this time.

Mission Statement

Mission statement is the most important issue to consider when developing an organization's strategic plan. A mission statement will give a clear insight of what kind of business the organization is at and who are its customers. A clearly stated mission statement will provide a sense of direction and the company's scope and goals to its employees, as well as creating a positive image to customers, investors, and stakeholders.


The Pepsi Co Mission Statement:

"To be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce healthy financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity."


I had chose Pepsi Co's mission statement as a sound mission statement example. First of all, Pepsi Co's mission statement is not too long and it is easy to understand. When I browsed online for a sound mission statement, the first criteria I looked for is the length. while I was searching, I didn't even bother to read a lengthy statement. The clarity of a mission statement is very important, but only in the case that people are interested in reading it.

Moreover, the first sentence of Pepsi Co's mission statement has clearly stated what is the organization's business and its existent position of the current market, such as its products and targeted market. Then, the mission statement provides a clear direction of the goals and objectives to the organization's employees, customers, investors and stakeholders. This will provide the competitive advantages of Pepsi Co to differentiate itself from its competitors. Lastly, Pepsi Co also includes its moral and ethical position.

Overall, Pepsi Co's mission statement identifies the position, scope, goals, products, targeted market, desired public image, and ethical position of the organization. In conclusion, the mission statement is easy to understand and contains all the information that the company wants to let people know about Pepsi Co.

More about Me....

My name is Shumei Li. I am the only child at home. I was born in China and lived there until I was 12-years old. Besides English, I also speak Chinese, both Cantonese and Mandarin. Usually, I speak Cantonese at home because my parents don't speak much English. My hobbies are watching TV and listen to music. Moreover, I like to hang out with my friends, even if we don't have any plans or ideas of what to do.

I am currently enrolled in Baruch College. I am a senior, major in International Marketing and minor in Chinese. This is my first time creating my own blog. I started this blog because it is a requirement of my BPL class. Please feel free to comment on any of my posts, because it is one of the components to get full credits for the assignment.