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This report reflects the whole process of the online simulation game of the StarSim program. The simulation game was about an automotive industry in which the students were hired and asked to make important decisions. The students were divided among different firms and competed against each others.
Firm A, was the company which I worked for. Firm 'A' was selling three different classes of cars; Alfa (family), Alec (economy), and Ace (truck). There were four periods for making the decisions. It was very important the firm to have a clear objectives, goals, and a strategy; strategy is the direction and scope of an organization over the long term, which achieves advantage in a changing environment through its configuration resources and competences with the aim of fulfilling stakeholder expectations (Johnson et al, 2009, pp-3). Firm 'A' main strategy was to gain more market share by attracting more customers with the improved product.
The competition among the seven firms was fierce; each firm wanted to be at the top. The game started with all the seven firm's performances were all the same. It was up to the decisions and strategies of each firm that will determine who will be at the top.
1.1 MISSION & VISION
The company vision and mission statement is very important as it provides guidance to the firm on where they want to be.
A mission is a general expression of the overall purpose of the organisation, which ideally, is in line with the values and expectations of major stakeholders and concerned with the scope and boundaries of the organisation (Johnson et al, 2005, pp-13) .
Firm's 'A' mission was to achieve high market share and increase customer satisfaction through providing them with better and improved products.
Vision is an integral part of strategic management and adds value to the process by integrating the products of strategic planning into a coherent and meaningful whole (Wilson, 2003, pp-65).
The vision for firm 'A' was to produce great environmental friendly cars which will reduce the environmental pollution.
2.0 EXTERNAL AND INTERNAL ANALYSIS
This analysis includes the PESTEL framework and SWOT analysis.
The PESTEL framework categorizes environmental influences into six main types: political, economic, social, technological, environmental and legal (Johnson et al, 2009, pp-25). This framework is specifically designed to analyze the macro-environment of any given industry.
Politics has a great influence on the way people do business. In an automotive industry, politics has a great influence on factors such as import tariffs, rules and regulations of business, taxation, and many others.
In an automotive industry there are many economic factors that have an impact on the performance of the industry; factors such as exchange rates, inflation, interest rate, economic recession, and many others.
Social factors have a great influence on the customers when it comes to the decision of buying the product. Factors like how the firm relationship to the public influences the social factors.
Technology is a very vital aspect in an automotive industry. As it is known, technological changes are very fast from time to time. The company should keep up with the technological changes since that almost all of the customers prefer new products with a new certain type of technology.
The concern for environmental pollution is on high alert; hence the companies should change their production methods according to the way which it would not affect the environment.
This concerns all legal issues like patent rights, trade marks, regulatory framework, and many others. In the automotive industry, the legal strength of the company can determine how the impact of illegal copy theft takes effect.
A SWOT summarizes the key issues from the business environment and strategic capability of an organization that are most likely to impact on strategic development (Johnson et al, 2009, pp-81).
Strength of a company is when a company holds a significant advantage over the other competitors. The strengths of firm 'A' is that the technological advancement of the products; the products have been upgraded to a very good level. The development center of firm 'A' is highly developed due to investment in technology. This gives firm 'A' an edge over the other firms. The prices of firm's 'A' products are unbeatable; this is due to that the products are in good quality and the price is very low.
Weaknesses are the disadvantages that a company holds over the other. Firm 'A' weaknesses was based on the financial side. The decision of investing a lot in technology has reduced the profit and the cost was high.
In the auto motive industry, there was a rise of new customers who were interested in minivans. This was an opportunity for firm 'A' to produce the minivan so as to target these potential customers.
The major threats were competition from the other firms and the other threats are economic recession and other PESTEL factors.
The main content of the simulation program was about decision making. The teams were responsible for analyzing the current situation and make long term decision that will affect the outcome of the firm in the next four periods. The decisions were divided in four categories: technology, marketing, distribution, and manufacturing.
The decisions made under technology were the most important to the development of the company. Investing in technology was very costly; during the first period of firm 'A' the amount invested in technology was very high, which resulted the firm's profit to decline. Although the profit decreased, the products attributes and performance significantly increased; hence the quality and the standard of the products in terms of safety, size and quality have improved (see appendix).
Investing in technology was a very tough decision because some outcomes of the decision came after a long time. The decisions were based on long term and short term. The long term decision in firm 'A' was made in the first period in making a major upgrade of the truck Alec (see appendix) the outcome of this decision was in the third period. The short term decision of firm 'A' was when making minor upgrades for the family and economy class, the outcome of these decisions was immediately seen in the second period.
The marketing decisions includes many aspects; one of them is that of corporate marketing which is about allocating the budget according to regional corporate advertising, direct mail and public relation. For firm 'A', marketing was very important since that the products were improved and the firm must make the public aware of the certain increased attributes of the product through advertising. The firm also advertised through all the four regions: north, south, east and west.
Distribution decisions include those decisions regarding the distribution of the products to dealers across the four regions: north, south, east and west. Firm 'A' allocation of products were distributed according to how the regions were selling. The region which was performance was poor, more dealers were increased and the dealership discount was increased. And those regions which were doing well, the number of dealers were increased.
Under manufacturing decision; decisions regarding production were done under this category. Increasing or decreasing the number of products is very costly. In the first period firm 'A' did not alter the production, but during the second and third period firm 'A' increased the production due to increase in demand. As a result of increasing the production during the second and third period; firm 'A' has experienced a large amount of cost and unfortunately the profit decreased a lot during that time.
4.0 SHORT TERM VS LONG TERM DECISION MAKING
Decision-making early on in the seven periods focused on getting the company up and running. This would allow efficient production of vehicles and generate income. To maintain investor interest and stock value, the company opted for an early release of dividends to shareholders. The decisions were made in long term and short term decisions
The short-term investment in product development allowed minor upgrades to come to market quicker in response to customer demands for safety and quality above luxury. No long-term decisions were taken at the immediate outturn whilst the company assessed the long-term prospects. The short term decisions are those decisions that the outcome of the decision is immediate, for example: in period one firm 'A' decided to make a minor upgrade for the family car Alfa, the product received its upgrade in the following period.
The long term decisions are those decisions which are made and their outcome comes at very long time, for example: in period one firm 'A' decided to make a major upgrade on truck Alec and the product received its upgrade during the third period.
5.0 WHAT DID I LEARN FROM THE SIMULATION EXERCISE?
The simulation exercise was an amazing experience, it seemed that those companies where really existing. The competition from the other groups was very intense and it was very tough to know what will be you're competitor's next move.
I have learned how to use to knowledge gained from the class rooms and use them in real life. The knowledge from the class rooms are very relevant to the real world of business.
During decision making, I have learned that if you think one step ahead, others think two steps ahead of you. The decisions made individually were less convincing than those decision made by the group. In a nutshell, I can say that team work is very important, there varieties of decisions to choose from the team, hence the synergy effect takes place.
This report has set out the strategic goals and rationale for Firm 'A'; this was explained by giving an explanation for the short and long-term goals and decisions that was taken to gain a share in the vehicle manufacturing industry.
The performance of Firm G started out healthy but because of poor informed decision-making processes and governance, the performance of Firm 'A' radically declined and resulted in the failure of the firm to realize their mission which was to become one of the biggest car manufacturing firms in the StratSim world.
The whole simulation game was an everlasting experience for a person who doesn't have a working experience. The simulation game gives the student a real life practice on how big automotive company make decisions and face a tough competition from competitors and where to invest the money. The fact that students were divided into different firms, the competition was fierce, each group wanted to at the top; hence making important and significant decisions was the aspect of the whole simulation program.