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.
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.
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