GB601 : Business Simulation Plan - Market Segments - Assessment – Answer

November 21, 2018
Author : Sara Lanning

Solution Code: 1GJF

Question: Business Simulation Plan

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Business Simulation Plan

Case Scenario/ Task

YOUR TASK

  • Select two market segments to target.
  • Develop and then execute a very focused strategy to profitably serve each segment.

 

Overview of Activities

Quarter 1: Organize the firm and set up shop

  • Name the company.
  • Sell 2,000,000 in stock.
  • Assign corporate responsibilities to the team.
  • Establish personal goals and team norms.
  • Analyze the market survey.
  • Establish corporate goals and overall business strategy.
  • Choose the target segments.
  • Design a brand for each target segment.
  • Schedule the opening of the first sales office.
  • Decide whether or not to open a web center.
  • Build a factory.
  • Quarter 2: Go to test market
  • Sell 1,000,000 in stock to executive team.
  • Establish employee compensation packages.
  • Hire factory workers and sales and service personnel.
  • Review brand design for each target segment.
  • Establish brand price and priority.
  • Design an advertising campaign.
  • Schedule production.
  • Purchase market research.
  • Quarter 3: Skillful adjustment and market expansion
  • Sell 1,000,000 in stock.
  • Review the market, financial and production data from the test market.
  • Adjust the firm's strategy and tactics (brand design, pricing, advertising, sales and service personnel, web marketing tactics, compensation packages, production) as needed.
  • Schedule the opening of a new sales office if you choose.
  • Quarter 4: Invest in the future
  • Prepare a business plan and seek investment from venture capitalists.
  • Invest in research and development in order to introduce new brand features to the market.
  • Substantially expand market coverage by adding web tactics and new sales offices.
  • Add new factory capacity.
  • Adjust the firm's strategy and tactics (brand design, pricing, advertising, sales and service personnel, web marketing, factory workers, development of human capital, production) as needed.
  • Quarter 5: Expand the business strategy

    • Study the market, financial, and production data to determine how to better meet customer needs, motivate employees, improve production economies, add to the bottom line, and surpass the competition.
    • Introduce new brands with the new R&D, continue with market expansion by adding sales people, new offices, new Internet capabilities, and production capacity.
    • Explore licensing opportunities and the development of strategic alliances.
    • Quarter 6: Refine the business strategy

      • Study the market, financial, and production data.
      • Adjust the firm's strategy and tactics as needed.

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Solution: Business Simulation Plan

The report consist of the analysis of the past 4 quarters and the next 2 quarters of Microteca Inc. which  involves the development of next generation of microcomputers to exceed their customers' expectations around the world by keeping them in an effective and competitive fast-paced connected environment. The company has three target segments which is Workhorse. Mercedes and Traveler. The plan consists of a review of the financial and market performance of the company and analysis of its environment through the usage of theories like Porters 5 forces, PESTLE and Swot analysis. A section consists of the various strategies which the company intends to employ in order to validate the 4 million dollars funding that the company is received in its fourth quarter. The last section consist of the analysis of the financial statement so the company and the tactical plan for the actual and the forecasted.

B. Review of financial and market performance during the past year (4 quarters)

 

By looking at the past financials of the company it is evident that in the fourth quarter the company was able to give a positive financial performance after the negative financial performance of the company in quarter 3 where it was not in a position to generate money for its shareholders since the company had lodged negative profits in the third quarter. In the fourth quarter the company had an above average financial performance and asset management compared to its peers. In the second quarter the company has a negative financial performance and the only area where it’s better than the industry average of 0.89 is its Human Resource Management where the company has a score of 0.727 due to its ability to recruit talent which is best suited for the job along with the productivity of the workers. Though the company has managed to make profits in the fourth quarter, it still needs to improve market performance since its marketing effectiveness of 0.555 is lower than the industry average of 0.707.  Also the highest suppler to Workhorse is Micr0teca ltd with 30% of their business and the company has a total market share of 15.06%  (Margolis and Walsh, 2001)

C. Market situation

1. PEST analysis

Political

The microcomputer industry is subjected to a number of regulations like accounting policies, ethical business practices and intellectual property rights conservation.

Economic

The main factors includes the global exchange arte with respect to the Australian dollar, interest rates, the pricing of the microcomputer products which affects the demand and supply of this industry

Social

The constant expansion due to the economic growth has led to consumers being updated with the latest technology which drives their want for the latest technology. The age demographic for this industry has lowered due to the engagement of these computers in younger generations (Hutt and Speh, 2005)

Technological

It’s essential to implement the constant innovation in a timely manner in this technologically sensitive sector in order to retain market share in the industry

Legal

The industry has strict rules for patenting technology and taxation policy hence it is important that manufactures strictly follow the intellectual property laws

Environmental

The disposal of wastage in a sustainable manner along with recycling of material dominates the environmental factors of the industry (Doyle and Stern, 2006)

2. Customers

The company mainly has three types if customers who use their products and their needs and wants are given in the table below

  • Workhorse
  • Mercedes
  • Traveler

(the customer needs and wants are exaplined in table 1 in the Appendix)

3. Competition Porters 5 forces

Bargaining Power of Buyers

The buyer’s power is moderate since the micro computes are highly sensitive to price hence the difference between one computer brands ill to be much compared to the other

Bargaining Power of Suppliers

The number if the supplier in the industry is limited hence they have a high bargaining power and they are big international companies with a few substitutes (Cravens & Piercy, 2006).

Threat of Substitutes

The performance of microcomputers is very difficult to get through other devices hence the threat of substitutes however a few technologies like gaming consoles, tablets and smart phones are eroding the sales of microcomputers progressively.

Threat of New Entrants

The ease of access for new entreats is from easy to moderate due to the ease of technology that can be created especially by smaller players (Webster, 2002).

Existing competition

The company has the following competition

  • Prestige Computers
  • TrendSetters
  • Pikainen Tech, Inc.
  • Computerland (Porter, 2008)

4. SWOT

Strengths

  • String Human resources management
  • High productivity of workers
  • Biggest customer of White horse
  • Goof future investments
  • High revenues in fourth quarter
  • Availability of 4 million dollars for 5th and 6th quarter

Weakness

  • Low market share
  • Financial performance with respect to first 3 quarters
  • Asset management
  • Effectiveness of marketing campaign
  • Financial risk (Fleisher & Bensoussan, 2003).

Opportunities

  • Introduction of a new brand of microcomputers to increase portfolio and diversify the products
  • Introduction of sales team in Shanghai toe exploit the Chinese markets
  • Increasing the supply of its products to Mercedes and Traveler to become their biggest supplier
  • Increase in its web based sales

Threats

  • Inventory management as any mistakes in forecasting demand will result in mismanagement of demand and supply
  • Aggressive competition by competitors may lead to failure in market capture
  • Enviornmental regulations by governmennts (Ehlers & Lazenby, 2004)

D. Corporate strategy

   1. Mission / Vision

At Microteca, our mission is to develop the next generation of microcomputers to exceed our customers' expectations around the world by keeping them in an effective and competitive fast-paced connected environment.

  2. Culture and leadership

The company is headed by Nelson Lopez whose primary responsibility is President-Overall Leadership and secondary responsibility is VP-Marketing. The company has various teams like human resources, sales force, manufacturing and finance which oversee these functions and departments. The culture is to compensate the sales force above the industry average to retain talent (Johnson, Scholes & Whittington, 2008).

    3. Basis of competitive advantage

The main competitive advantage lies in the human resources management of the company and the future investments that the company is going to make

   4. Corporate strategy

The corporate strategy is to gain competitive advantage through focus on smaller and high margins segments by building market position and defending its through technological advancement. To be the provider of the best customers service and become the market leader in microcomputers.

  • focus on large, highly competitive segments
  • focus on continuous growing segments
  • focus on geographic markets which minimize distribution costs
  • focus on continuous growing geographic markets
  • build a market position and defend it
  • take the lead and keep it and be the first to innovate
  • watch wisely the weaknesses of our competitors to create competitive advantages over them
  • be the market share leader
  • be the profit margin and technology leader
  • be the high service provider in the market
  • provide the best experience at customer service personalised (Hillier, Grinblatt & Titman, 2011).

5. Ethical and Social Implications

The company has a norm for its attendance for meetings and ensure that it has an organizational culture which is conducive and the employees and workers feel safe. Also the company complies with the Australian laws for recycling and disposal of unwanted material

E. Future Strategy for 5th and 6th quarter

1. Marketing Strategy

In order to improve its marketing strategy the company should

  • Introduce social media pages on Face book and Twitter through which it can engage with its customers directly and address and queries that they have through direct interaction
  • Try to increase market share by increasing visibility of its products
  • Working on its pricing policy to make it more competitive compared to other brand like Prestige Computers and Computerland
  • Decreasing its cost of good prices by increasing the number of units for production
  • Build web traffic by hiring state of the art marketing expert on project basis (Skinner, 2003)

2. Sales Channel Strategy

  • Increases the sales by at least 10% through the web sales channel of all the brand of the company
  • Increase in sales by at least 15% through the sales offices
  • Capture markets in Shanghai by introduction of new sales channel in this city since China is one of the biggest emerging markets in the world
  • Increase the sales people in total  by 7 to increase sales (Quélin & Duhamel, 2003)

3. Human Resource Strategy

  • Increment of salary by 10% and incentive structure for high performing employees
  • Maintain the compensation structure for factory workers since it is the best in industry
  • Introduce training and development programmes to improve the soft skills in its employees depending on the current need of the company

4. Manufacturing Strategy

  • Introduction of a new product for the Traveler segment to increase sales
  • Better inventory management through the introduction of state of the art inventory management software of eth company
  • Demand and supply management for future orders
  • Increasing the operational efficiency by 10% by utilization of more operating capacity
  • Decreasing the labour cost/unit by producing more units within the same labour charges
  • Optimal usage of fixed capacity to maximize efficiency (Arora, Fosfuri & Gambardella, 2004).

 5. Financial Strategy

  • Incraese in cost in research and development which was maximum in third quarter at 3246827 AUD
  • Increase revenues by 30% per quarter in the next 2 quarters
  • Increase in cost of goods sold increase by only 15% in the next 2 quarters
  • Reduce cost of inventory holding by matching demand and supply
  • Increase in cost of Microdesk Ultra from 4500 to 5400 and Mircrolap Ultra from 2800 to 3400 (Grant, 2015)
  • F. Financial request

4 million AUD is to be spent in the following way in order to increase its efficiency and focus on the two segments of customers. The given funding is to ensure that the company takes advantage of the opportunities that is available to them and become a market leader in the microcomputers business

Research and development for existing products and new product – 800000

Advertising – 100000

Sales force increment – 100000

Inventory Software -200000

Web Marketing expenses- 300000

Licencing technology- 500000

Expansion of plant capacity - 1500000

Cash Account – 300000

G. Financial Statements

 

Analysis of the financial statements is given

(Statements have been attached in the Appendix)

  • Revenues in the actual is generated from second quarter and almost doubles in the third and fourth quarter
  • In the forecasted scenario the revenues is expected to increase by a minimum 30%
  • Cost of good reduce by 15%
  • Marketing research for actual and forecasted remains the same
  • In the cash flow its assumed that there is no emergency loan of the company
  • Sales force expense has increased due to introduction of new sales staff in the offices especially the one projected in China

H. Tactical Plan

The tactical plan has been attached in the appendix 3

  • For increasing sales Traveler segment is concentrated on and the other is White horse
  • The production capacity has been increased to manufacture the two new products for the target customers
  • New office opened in Shanghai due to which forecast sales cost increases
  • No new web centre are opened other than the first quarter (Arora, Fosfuri & Gambardella, 2004).

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