Each student will submit a 2500 words (including exhibits) Business Plan for their Simulation Company. Use Times Roman 11 font, 1 inch margins, double spaced. The business plan should provide the Board a report on your strategic decisions, with an account of your performance state, and your plan for the future. Specifics of your decisions over various quarters, assessment of those decisions, and how you stand vis-à-vis competition should be included. Use the following headings and subheadings to organize your Business Plan:
2) Strategy of the Firm – SWOT, STEEP and Competitor Analysis
3) Analysis of current situation and the market
Industry analysis and firm capabilities
Market structure and dynamic strategy
Business strategy based on value chain
Functional Strategies – Marketing, Operations, Human Resources & Finance
Business eco-system and stakeholder strategy
4) Alternative Growth Strategy Scenarios for Future (what it will take to get ahead and to stay ahead)
5) Implementation Plan – Corporate-level strategy and organization
Exhibits
Executive Summary
This paper revises all key steps of business plan for our Simulation Company (called Septem Corp) that includes analysis of the company’s strategy; analysis of current situation on the market and internal environment of the company (industry and market analysis, business strategies, etc.); analysis of Alternative growth strategies for future; and Implementation plan.
As for Septem Corp, it is a company that sells computers (with average number of 48 per day). It is a market leader with good market share, wide international marketing, and great level of fixed capacity as well. As for weaknesses, Septem Corp needs improvement in Assets Management due to problems with efficiency – the demand for its products is twice higher that possible production level.
Septem Corp has 5 products for now, 41 salespersons in few locations, including Paris and Sao Paulo. It is a market leader that performs on oligopoly market. The company tries to build all its processes focusing on its customers (free customers calls, 30 days return, etc). Despite strong client-focusing, Septem Corp does not forget about its employees. The working conditions are pretty hard due to high demand level for its products, but the salary level is higher for 20% than average on market, as well as other social benefits are included to working contracts. We have identified that good treatment to workers gives significant results on profitability (we received $0.9, $1.2, $1.9 billion of Net Profit for the first three quarters relatively), so we never reduce the level of workers support.
As for Stakeholders Strategy, we consider profit as a key indicator of their satisfaction. Also, as further action, we made customer segmentation and product positioning in order to increase our profit and for better clients understanding. Our plans for future are focused on increasing R&D development in order to make our leading position even stronger.
Strategy of the Firm – SWOT, STEEP and Competitor Analysis
SWOT Analysis
A. Industry Analysis and Firm Capabilities
When it comes to leading in this sensitive industry you have to take really good care of two things; focusing on as many market segments as well as predicting competitor’s moves. Our company not only led the industry but got high sales on various of markets with several products. We were able to achieve that by taking care of our staff at first and then focusing on producing different products to different markets. By doing that we are minimizing our chance of failure and getting our name out there to as many end-users as we could, it's very important to build a reputation especially by first impressions. We manufactured almost 3,000 units yet our net demand was double that. Customers liked the product, sales channels were built all over the world and marketing research plus campaigns were set to the full limit. One mistake we regretted that our corp. did not agree on increasing the fixed capacity and that’s what caused losing half of our potential customers. We had the maximum rate in the industry in both fixed assets turnover besides cumulative total performance. We started real strong diving into the industry, many board members were afraid taking this step thus this technique got us the lead. Our main job now is to keep it.
B. Market Structure and Dynamic Strategy
Most companies fall in one of four different market structures: monopoly, monopolistic competition, perfect competition, and oligopoly. Our company Septem Corp falls into the oligopoly market structure. Oligopoly market is when only few organizations have control over the market and because the entry and exit barriers are high, our company enjoys a monopoly kind position. Companies that are in an oligopoly market are very considerate when it comes to decision-making. The reason is because the number of organizations competing is small and every decision made can make a direct influence on the market. Septem Corp began as a small company; in the first quarter we had only one store located in Chicago, carried two brands only 7th Degree and 7 Steps. Septem had hired 7 sales people in Chicago. Since we opened, Septem Corp has experienced a remarkable growth. Today, Septem is considered the leading company in the market and the company now has 5 brands. Internationally, Septem has expanded its sales channels to cities like Shanghai and recently Paris and Sao Paulo with the total of 41 salespeople in all of its locations.
C. Business Strategy Based on Value Chain
Septem Corp is a worldwide company that selling computers. We have five manufacture places and have stores in Chicago and Shanghai. At the beginning, we designed three products, 7th Degree, 7 Steps and 7 Heaven at first and then we designed 7th Degree+ and VII Heaven because the products as so popular. The products from suppliers to consumers need to go through a business-level strategy. We designed the brands for different consumers, make the products from manufactures, marketing it and then selling it to consumers. The value chain analysis can divide into five parts. The first one is inbound logistics, for our company, we try to get resources from suppliers with a low cost, for example, we have manufactures in China, as we all know, the price of commodities in China are lower than other countries, so we get most of the resources from China is a good choice to decrease the cost. Next is operations, we have 11 employees in Chicago, Paris and Shanghai, 8 employees in San Paulo. The fix capacity in our company is 50 units per day, operating capacity is 48 units per day. 48 units per day a hard work for a man, however, we provide very good salary, retirement pension and full coverage health benefits for employees. In this way, I believe our employees are willing to work and will have high efficiency. Outbound logistics for our company main focus on Chicago, Paris and Shanghai, because this three cities have big market size, and the purchasing power by consumers are high. For marketing, we put different employees in different department, for example, we put two employees in technology support part and other departments we put three employees each, because we are confident to our products so we put more on products selling. Service is an important business strategy in value chain, our company have a completely service system, if you have any questions with the products, you have call us for free. Also, we provide after-sales service, if you are not satisfied with our products, you can return it in 30 days with receipt, and two years free repairs. Our company use cost leadership differentiation strategy and focus strategy to get more profits.
D. Functional Strategies – Marketing, Operations, Human Resources & Finance
In this virtuous game, I learned a lot about doing business, which would enlighten my future idea of developing a company. When I played around, I found several functional strategies in marketing, operations, human resources and finance, which would be definitely helpful for me to understand the key points in the chain of running a business in the future.
When we started the company, with limited amount of investment, we could not make the size too large, which would make the focus diverted and end up less benefit. Therefore, we chose to only open the Chicago office. In line with this, we carefully made sure each step is mini enough so that we would not risk losing too much, and we set our capacity to be 25 units per day, which is the minimal available choice. Later on, when we planned to expand our market, we hired 7 employees and opened an office in Shanghai, which has a large demand. Once we hired the employees, we never let them down. The annual salary and health benefits package provided by us were all above average with over 20%, while weeks of vacation and pension of salary is the same as average. Later on, we found that the production capacity of the company could increase as the treatment to the employees becomes better. As a result, we continued to make more profits in following quarters. The second quarter we made a gross profit of $2.1 billion, third quarter $5.3 billion, and fourth quarter $5.6 billion. And our net income for these three quarters were $0.9 billion, $1.2 billion, and $1.9 billion respectively.
The other thing I learned from both the game and the class is the significant role of supply chain. To ensure that products could be efficiently delivered to the customers, it entails using minimum inventory, high inventory turnover, short lead times and low cost suppliers. I recall one scenario in our simulation. In the first quarter, we carefully set up our sale strategy, and invest little amount of money on unnecessary expense. We opened one office in Chicago, since the demand is high. In the first quarter, we did not produce that many goods. As a result, in the second quarter, our goods were in short supply and there was huge demand. In response to this, we changed our strategy, increased production capacity and hired more people. Consequently, we obtained more benefits later.
When we made decisions for the overall well-beings of our company, we tried to follow the 9-M model as we learned in class. So far as I think, there are several Ms that are more important than all others. First, the manpower shall be allocated properly. In the first quarter, there were 7 person employed in Chicago office. While in the second quarter, we planned to expand our scale, and hired 22 people, and in every office we allocated 11 workers. We found this was critical for our benefits. Second, we shall pay attention to the machinery function, which deals information-enabled intelligent machines. The same as to the experts. When we found that the R&D was the limiting step, we started to put more money into R&D, and the income balance turned out to be better. Another major function is marketing function. We aimed to learn of what buyers want, instead of trying to just sell, deliver, and service a product.
E. Business Ecosystem and Stakeholder Strategy
Septem Corp is a microcomputer development company. We use the business ecosystem and stakeholder strategy to focus on financial performance, marketing effeteness, market performance, investment in the firm’s future, human resource management, manufacturing productivity, asset management, financial risk, and creation of wealth. Our company networked with organizations including suppliers, distributors, customers, competitors, and government agencies we were able to deliver a specific product through both competition and cooperation. Meanwhile keeping our stakeholders happy by making a profit.
First of all, in the first quarter we concentrated on our customers’ needs, the price they were willing to pay and the market size. The strategy we used was to determine the company’s objectives, purposes, or goals, produces the principal policies and plans for achieving our goals. We defined the range of business in our company by pursuing the kind of economic and human organization we intended to be, and the nature of the economic and noneconomic contribution. We intended to make our shareholders, employees, customers, and communities successful by maintaining the company's mission statement “technology and innovation not only in our backyards but all over the world.”
In the second quarter our goals and strategy were on market size we focused on fringe segments that were out of the mainstream. Our geographic market focused on the middle of the cost/size continuum. The company's competitive posture was to build a market position and defend it. Take the lead and keep it and be fast follower, imitate smart competitive moves. By being the distinctive competencies we were the market and technology share leader. We built five successful brands of computers, which we had to go back and build a bigger manufacture to keep up with the demand of our products. While maintain the lead in the computer industry.
The third quarter we shared 22% of the market while staying with the pack in market demand. The company’s gross profit was $2,110.657, while our expenses were maintained in research and development, advertising and sales office expense. There were times when we had to meet with our suppliers to make sure they were able to keep up with the demand in supplies needed for us to continue delivering our product. We hired 15 additional sales people and open new sales offices in Chicago, Paris, Shanghai and Sao Paulo. At that point are annual salaries was $97,193 and went as high as $115,943 by the fourth quarter.
In the fourth quarter we had to be very aggressive in maintaining the demand for our products We went back to the white-broad and decided to build more factories. We lost sales because of stock outs in the third quarter. We hired more factory workers and pushed our factories to full operating capacity. We made sure our employees were paid well, had full health benefits, vacations and pension. We had to lock-in value exchange, and position our best products to gain customer share.
Alternative Growth Strategy Scenarios for Future
In terms of future alternative growth strategy, I believe the company should always adjust its position to accept the challenges. As the market structure changes, such as from niche markets to perfect competition, the company should grasp any available resource to stand out. As we learned in class, a perfect competition is more possible to appear in our case, since there is lack of significant fixed costs or investments, and running business largely on variable costs. With limited barriers to entry, the company should balance its R&D and other expenses. Starting from a small company, we rely heavily on affordable and accessible technology, and therefore we do not want to risk developing new technologies. With free entry, new firms would find it easy to set up shops and start producing and selling. On the other side, in order to stand out from the various stores, we have to be equipped with something unique, which is usually a different technique. The right decision shall be that as company became larger, the fraction on R&D shall be increased.
A key feature of perfect competition is that, as the professor instructed in class, the firms do not invest in developing new technologies, instead they heavily rely on affordable and accessible technology. For example, in our case, among the group of 8, few groups invest put reasonable fractions of money expenses on R&D. In sharp contrast, quite a big sum of money was used to pay the stipend of employers, office expense and advertisements. Within this atmosphere, the competition is perfect but non-progressive. In another word, this competition will not drive the technology to progress. Therefore, in response to this problem, we may need to increase more investment into R&D, which would shift the perfect competition to oligopoly or monopoly. The one with better technology would stand out finally, since we all produce similar brands and customer would eventually favor one instead of others. The field of computer industry is seemingly a hyper-competitive market, because computer life cycle is very short. However, the build-up of each computer is supported by the invisible R&D, which makes the market nascent competitive.
Implementation Plan
