Individual report on simulation exercise- Glo-bus
Introduction
Generic strategy
Undeniably, marketing strategies for different enterprises are streamlined to develop competing strategies comprising of promotions, pricing and advertising. As such, our financial strategy focused on creating a one star level camera to be dispensed to our consumers at lower prices. In addition, the strategy purposed at developing a 4 star camera to be utilized by stylish customers. Deductively, the uniqueness of our pricing and quality facilitated maximization of our returns since our prices were relatively cheap, hence affordable. Moreover, multi-featured cameras we produced would offer a competitive edge for our products and hence promote our company's brand.
Our credit rating attained significant growth attributed to the fact that steady payments were remitted up to the eighth year. As such, we attained a satisfactory credit rating of A by that year and an image rating of 78. As a strategy to maintain this rating, decisions were arrived purposed at maintaining these payments periodically (each quarter) as it was the core determinant of future credit ratings. Maintenance of a high credit rating raises investor expectations and facilitates sustained increase in profits. Sale and purchase of share dividends also constituted as part of our generic strategy towards attaining a competitive edge over other competing firms.
For this reason, in the fifth year, we purchased huge shares and this contributed to the significant increase in returns on Equity as well as earnings per share in year six. Purchasing of shares reduced our liquid capital but it offered more cash for investment in the following year and this enhanced our growth. Precisely, purchasing of shares made a positive impact to our company in that it increased the value of our shares, and the company at large. Dividends remitted remained relatively constant from year 5 onwards but was relatively high in year 6 and this satisfied our investors with regard to their earnings. These generated a positive correlation inline with dividends remitted and the mutual success of our company.
In terms of our market shares, we increased the marketing budget for different regions at a time and this resulted in an increase in the price of our market shares in some years and downfall in others, we focused more on the North America region than the Europe-Africa region since the availability of camera markets in North America was higher when compared to Europe-Africa regions. We believed that investing in ready markets would develop an increased customer preference for our brands and hence increase our returns. Deductively, Europe-Africa had less ready markets, hence less profitable. As a result, from the market conditions connoted herein, it is essential to develop viable strategic plans prior to making any business ventures. During start up, our entry level cameras were less competent but we developed a multi-featured cameras, which ensured increased returns for our company.
Industry overview
SWOT ANALYSIS
Strengths
High quality employees allows for increased returns for our company. As such, they formed an essential basis as the company’s strength. We purposed to increase rewards for our employees as this offered motivation significant in attaining a high level of productivity for our company. Higher productivity attributed to our competent workforce reduced warranty rates for our company. In addition to building the pillar of the company’s strengths, we developed corporate programs aimed at improving the working conditions of our employees, which motivated employees to work harder, hence ensure increased returns.
Our strength was also based on the fact that we offered several camera models, which enhanced attainment of strong market share. Increased returns resulting from vesting on competent workforce facilitated development of multi-featured camera models, which worked to our company’s advantage.
Weaknesses
At the entry level, we developed less competent camera models , with lesser warranties when compared to those of the other competing firm. This occurred as a weakness in that consumers preferred cameras with warranties. In addition, the camera market is dynamic and we had to vest more resources in developing cameras that suit constantly changing camera preferences of our customers and this caused a significant strain on our resources.
Opportunities
Our strategic approaches offered viable opportunities for expansion into large market segments. Precisely our strategies were aligned to increasing our competitiveness. Therefore, our action plans were dynamic and ensured the attainment of a larger market share, with reduced costs and increase profits. On the other hand, the profits accumulating on the previous years were utilized to improve the financial performance of our company and allow attainment of a competitive edge over other competing firms. During the sixth year, our image rating and credit share was the highest when compared to those of competing firms and this created increased preference for our brands, hence offering an opportunity for our company to flourish.
Threats
At the entry level, our team was strategically positioned, as we passed several strengths such as our highly competent workforce. With time, the competing firms emulated our strengths and managed to develop stiff competition against our company. In addition, we focused on developing cheap multi-featured cameras, while our competing firms developed less multi-featured and quality cameras at higher prices, which gave them increased returns.
Company overview
As of the year 6, the company enjoyed a distinguished image with a credit score of A and an image rating of 78. In addition, the company had a lower EPS of 1.51 and a relatively lower ROE of 11.6. Therefore, in order to raise the company’s competitiveness, more focus was laid was laid on increasing the capital through issuance of stock. For recovery purposes. More efforts were laid on developing our entry level camera rating as well as maintaining of the multi-featured cameras.
Decisions
Our team set the goals and objectives geared towards making our team the leading Camera Company in the world. Other objectives that we intended to achieve included making our team the number one entry-level camera in the world and we were committed to implementing the vision our company through sustainable business practices.
Strategies
Our entry level entailed choosing the low cost strategy because we believed it would enable our company to realize a competitive advantage. The low cost strategy entailed choosing low costs for our product by setting low prices as compared to those from the rivals.
Speaking of multi-features, our team chose the differentiation strategy because we believed it would distinguish the company from other global players. The differentiation strategy enabled the team to differentiate cameras according to different distinctive features such as Higher P/Q rating, offering a wide range of models, and different marketing attributes such as promotions and warranty periods.
Decisions
Product Design
On our entry-level cameras, we invested heavily on the core components from years Y5-Y7. The major features under the core components involved alterations of the image resolution, size of LCD display, and the quality of the lens. However, the LCD display and lens quality were reduced from years 8-10. The brand-specific components were high on year 5 but we reduced them gradually in the following years to match the needs of the competition. Factors altered under the brand specific components included making changes in the imaging device, camera controls, ergonomics, and accessories. The number of special utility features was high at the beginning of year 5 but reduced by 1$ in the following years. Another feature that underwent reduction was the cost reduction in investment research and development/engineering aspects of the camera. The number of models for the entry-level cameras increased from 3 in Y5 to 5 in Y10.
On the core competencies of multi-featured cameras, the team begun by invested lightly in image resolution starting with 11 megapixels in the Year 5 and increasing gradually to 16 megapixels by Year 10. Equally, the size of the LCD display was increased gradually from Y5 to Y10. The lens quality was high at the beginning of Y5-Y7 then it reduced in Y8 and Y9 but was increased to the original resolution by the Y10. Speaking of brand specific components, the costs incurred in improving the imaging device increased gradually towards the end of Y10. The cost incurred was high in Y5 reduced by $4 in Y6 and Y7 but increased by the end of the last 2 years. The costs incurred were the same in accessories and ergonomics. The team decided to increase the number of special utility features but reduced investments in new product development and the number of models.
Marketing Decisions
Marketing decisions were altered depending on the geographic region. The major differentiating features that were altered involved the number of retail dealers (multi-store chains, online retailers, and local camera shops). The costs incurred in offering the technical support and quarterly advertising varied according to regions. Marketing decisions for entry-level and multi-featured cameras varied according to features such as the wholesale price, promotional features, and warranty period.
The reduction in the average wholesale price for entry-level cameras was undertaken in order to enable the company to gain market share in addition to enabling it to sell more multi-feature cameras because of the increasing brand loyalty. Warranty periods were also increased in order to increase confidence of consumers in the company’s products. Other marketing decisions varied depending on the prevailing factor in the industry.
Assembly Decisions
These decisions were analyzed according to the entry-level assembly decisions and multi-featured assembly decisions. Analysis was done in terms of the costs of units assembled and shipped. This was calculated on a quarterly basis depending on the geographic region.
Labor and compensation decisions
This involved altering factors such as compensation and training and issues to do with the labor force. Concerning compensation and training, the percentage in the base wage per PAT member was lowered at the beginning of Y5 increased in Y6-Y7 but reduced by Y10. Other factors that were altered in compensation and training included the incentive pay, the quarterly attendance bonus costs, the fringe benefit package per PAT member, and the training and productivity costs per member. Labor force decisions were made based on the New PATs hired and the units assembled at OT, and all decisions were made on a quarterly basis. The hiring and laying off of PATs was done to avoid severance in packages while at the same time team intended to maintain high production levels.
Corporate Social Responsibility and Citizenship decisions
No amount was donated to charitable organizations but the team was involved in green initiatives in Y7 and Y9, and contributed money to energy efficiency programs in Y7, Y8, and Y9. The company was also slightly concerned with improving the working conditions and as well, in maintaining the supplier code of conduct.
Finance and Cash Flow Decisions
Decisions in this category involved alterations in the pay down of debt and dividend per share in different quarters, issuance and repurchase of shares. The company repurchased shares in Y8 and Y10 in order to reduce the amount of dividends paid to investors.
Performance, Challenges, and Strategy
According to results from Y6 scoreboard, Canon came third after Alphacam Limited and Benq. This shows that the performance was not so bad. Our revenue volume, image rating, credit rating, stock price, and the return on investment can be used to show the performance. Year 10 scoreboard reveals that the Canon was second after Focus Inc. and this ranking is based on calculation of investor expectation score, best-in-industry score, the overall score, and the changes from the previous year.
The results reveal important details about our strategy. First, the team learnt that strategic objectives should be established depending on strategies undertaken by the competitors. This includes conducting an examination of the possible strategies competitors are likely to do with regard to sales volumes, price variations, market shares, profit margins, and other costs. Similarly, the global low-cost strategy for entry-level cameras and the global differentiation strategy for the multi - feature camera was not a bad strategy.
Our challenges/mistakes included disregarding investors, putting myopic focus on the share of the markets, setting the initial prices for our cameras at a slightly higher price during the first years of production, failing to understand when to buy or sell shares, and failure to address dividends verses repurchasing issues.
Conclusion
The simulation exercise enabled the team to learn a lot about strategy gaming hence expanding our knowledge in strategy formulation. Team members gained competence in analyzing various intelligence reports, financial statements, and operating reports. Team members also learnt how to obtain a thorough understanding of cause and effect relationships within the competitive market. It also became evident that communication is a vital tool with teamwork and the vision of the company must always be accommodated in every decision. Finally yet important, the team learnt that simulations are applicable to real life examples and hence, people should always work together to deliver better results.
Reference List
Glo-Bus Statistical Review, 2012. Canon (Company C). Summary of Decision Entries.
