Business Strategy Game
During the playing of the game, the win and the lost can be stimulated our team members to apply the right strategic theories to our Company B. By the use of Porter’s Five Forces – bargaining power of buyers Our strategy is to cut the price of footwear, increasing the advertising budget and bid the celebrity appeal to occupy more market segment. By the use of Porter’s Five Forces – threats of entry Our strategy is to increase the percentage of the superior materials usage and to increase the number of models in branded production.
By the use of Porter’s Five Forces – intensity of rivalry among existing competitors After earning of profit in Year 11 and 12, our strategy is to invest plant capacity at the end of year 13 in Asia-Pacific because the production cost is lower than in North America. The reject rate of production is also lower than other region.
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This strategy may result in the low cost with sufficient quantity of footwear to meet the demanding market in order to win competitors. Result of our Company B In Year 12, our Overall Score of 109. tied for the 3rd best Overall Score performance of the year, worldwide. The return on Average Equity – our ROE of 34. 2% tied for the 41st best ROE performance of the year. Our company achieved a Global Top 50 rank no. 1 performance on Overall Game-To-Date Score in Year 13. Our Overall Score of 109. 5 tied for the best Overall Score performance of the year. In Year 14, our company achieved a Global Top 100 performance on Overall Game-To-Date Score. Our Overall Score of 105. 5 tied for the 86th best Overall Score performance of the year.
In Year 16, our company returned back to Global Top 50 performance on Overall Game-To-Date Score. Our Overall Score of 107. 5 tied for the 30th best Overall Score performance of the year, worldwide. Our Earnings Per Share of $12. 17 is the 24th best EPS performance of the year, worldwide. The end of this report is to evaluate our strategies and to make recommendations. Introduction Team members of four forms a Company B to play this stimulated game from year 11 to year17. This Company B is a list company to manufacture and sell different brands of athletic footwear around the world.
Our vision, mission, objectives, accounting data and income statement are shown in Appendix 1. The role and responsibilities of our Board of Directors are in the form of organization chart in Appendix 2. Before start the game, our members agree to use Porter’s Five Forces to analysis and build up the right strategic position to win the game. Our strategy is to start with low price with increasing the advertising budget and bid the celebrity appeal to occupy more market segment. The price and product benefits of our company are posted in Strategy Clock in Appendix 3.
If our company can earn sufficient fund, it is proposed to increase production in Asia-Pacific (AP) region. It is because the production cost in AP is lower than in North America (NA). During the game, Industry Scoreboard is our main indicator which shows us our strategies right or wrong. Another indicator is the Market Snapshot which can indicate our competitor’s intention in strategies. Any change in our strategies is based on Porter’s Five Forces to analysis and implement the market, and complement with the results of Industry Scoreboard and Market Snapshot.
Finally, use of “green” Footwear-Making materials and Ethics Training to all employees is proposed for the good image of our Company B. Performance Analysis and Evaluation By the use of Porter’s Five Forces model to analysis the athletic footwear market around the world; our strategy is to cut the price of footwear in the Year 11 and 12, and to increase budget of advertisement and to bid celebrity endorsements in order to boost the sales volume in a competitive industry . If the sales volume is increased, the inventory may change to cash.
Our company may then invest in Asia-Pacific (AP) plant and decrease the production in North America (NA) region. It is because the cost of production in AP is lower than in NA and production reject rate is also low in AP. The performance analysis in Year 11 The footwear-making was changed to use the “green” materials and donated 1% of pre-tax profit as charitable contributions. In compare with other competitors in the branded sales market, a slightly increase in price in the internet sales and wholesale markets were added to suit markets demand but the prices were still lower than the markets.
In branded production, enhanced styling / features was increased from $10k per model to $12k and $14k in NA plant and AP plant respectively. In private-label production, AP plant increased the percentage from 25 to 26 to the superior materials usage and also increased the styling / features from $5 to $7 per model. For the S/Q rating of pairs, 3 stars were increased to 4 stars to the NA and AP plants. The private-label pairs to be manufactured in AP plant were greatly increased from 394,000 to 800,000 to suit the market need.
Therefore, the proposed shipment from AP plant to EA and AP warehouses were also increased from 185,000 to 476,000 and 285,000 respectively. Due to our increased in quantity of production, our bid prices to private-label were also lower to $30 in EA and AP markets. The evaluation in Year 11 Our strategy was kept going on the low price policy by the use of Porter’s Five Forces model- buyer bargaining power, increasing the advertising budget and bid the celebrity appeal to occupy more market segment. The performance analysis in Year 12 Ethics Training” to the managers level was introduced so that business level management could take the right responsibility. For the branded sales market, our prices were still set below the current market prices but the S / Q rating were revised to 5 stars to all markets. For the stimulated the NA and EA markets, the models were also slightly increased in NA, EA and AP. This was the first time to increase the celebrity appear to all markets from the range of 130 to 170. Due to the high production cost in NA plant, the major production line would be transferred to AP plant.
In order to achieve high quality, the use of superior materials from 50% to 60%, the number of models from 200 to 250, the enhanced Styling / Features from $14k per model to $16k and the Best Practice Training were removed from NA plant to AP plant at $1,300 per worker. The wholesale prices were raised to $44 – $45 to all markets but our set prices were not the highest. “Tiger Green” and “Jose Montana” were bidden for celebrity endorsement. The private-label pairs to be manufactured were increased from 800,000 to 1,600,000.
Due to the increased production in AP plant, shipment to NA, EA, AP and LA warehouses were increased to 147,000, 800,000, 300,000 and 197,000 respectively to reduce the transport cost and to stabilize the exchange rates. From the date of private-label bids in Year 11, the offer quantity was dramatically increased from 476,000 to 880,000. The bid prices were also slightly increased. The evaluation in Year 12 Our low price policy, expanded the market segments by means of advertisement and bade for celebrity endorsement were again proofed fruitful success and listed in the Top 50 rank no. 3 (see Appendix 4 Year 12).
The performance analysis in Year 13 Ethics training was provided to all employees because it was proofed successfully to all managers. For the branded sales forecast, the prices of internet sales and wholesale prices were slightly increased and it was hoped to increase the sales revenue. At the same time, models available were also increased in the wholesale markets. In order to reduce our expenditure, rebate offers were reduced to all markets. For the branded production, the superior materials usage was reduced to 55% and the best practice training was also reduced from $1,300 per worker to $500 in AP plant.
In the use of superior materials usage and S/Q rating were increased in the quality in NA plants private-label production. After considering of EA and AP markets for private-label bid, only the quantity was increased from 300,000 to 340,000 and the bid prices from $31 to $33 in EA market, from $32 to $33 in AP market were adjusted. The evaluation in Year 13 Our Company B awarded the Top 50 rank no. 1 in the world (see Appendix 4 Year 13). Our major strategy was stimulated the sales to occupy more market segment and increased the production quantity in AP plant and reduced in NA plant.
It was the way of our strategy to increase the sales revenue and to reduce the production cost. Our strategy met our expectation in the market. The performance analysis in Year 14 The workforce diversity program was applied. After analysis other competitors, reduced the price in the internet sales but increased the prices of all wholesale prices were applied. Advertising budget was increased from $6,000k to $7,000k in EA market, from $3,500k to $5,000k in AP market and from $4,000k to $5,000k in LA market. Rebate Offer was increased in the EA, AP and LA markets.
For the branded production, the superior materials usage was changed from 55% to 58% in AP plant. The incentive pay was also raised from 0 to 0. 3 per non-rejected pair in NA plant and 0. 8 to 0. 9 in AP plant. The best practice training was raised from $500 per worker to $800 in AP plant. The branded paired to be manufactured was reduced from 2,000k to 1,500k in NA plant in order to reduce the high cost. Our branded shipping strategy was changed NA plant shipment to EA warehouse and AP plant shipment to NA and LA warehouses.
For the private- label production, the reduction of superior materials usage from 35% to 34% in NA plant but increasing from 30% to 35% in AP plant was applied. As the market demand, the NA and AP plants were increased in quantity from 400k to 900k and 1,800k to 2,800k respectively. There were also increased shipments from 372k to 851k (NA warehouse), from 880k to 950k ( EA warehouse ), from 340k to 950k (AP warehouse) and 341k to 841k (LA warehouse). The quantity of private-label bids were increased to all markets and the bid prices were reduced only from $35 to $33 in NA and LA markets.
The evaluation in Year 14 Our Company B only awarded the Top 50 rank no. 85 (see Appendix 4 Year 14). As our strategy was to increase the production rate in AP plant and our sales performance was not in our expectation, our strategy was requested to fine tune to keep our strengths. Second place of gold star was awarded. The performance analysis in Year 15 The charitable contribution was raised from 1% to 2% of Pre-Tax profit. The workforce diversity program was cancelled. The retail price was decreased from $78 to $72 in internet marketing but there were crazy increased in wholesale price i. . from $55 to $68 (NA), from $60 to $66 (EA), from $48 to $65 (AP) and from $56 to $80 (LA). At the same time, the advertising budgets and celebrity appeal were increased but the retailer supports were decreased to all markets. The reason was that 5-Year and 10-Year loans were requested to repay in a short time. For the branded production, change in annual base wage was decreased to 0% in AP plant and incentive pay decreased from $0. 3 per non-rejected pair to $0. 1 in NA plant, and the best practices training was reduced from $800 per worker to $400.
The branded pairs to be manufactured were reduced from 1,500k to 1,200k in NA plant and 3,200k to 3,000k in AP plant. For the branded production shipping, NA plant to NA warehouse was remained and AP plant to EA warehouse was increased but AP plant to LA warehouse was reduced. The bid for Celebrity Endorsement Contracts was awarded Jose Montana ($600,000), Kobioshi Jones ($600,000) and LaBron Game ($500,000) to avoid other competitors to bid. The private-label production was increased from 900k to 1,200k in NA plant and from 2,800k to 3,000k in AP plant.
For the private-label bids, both quantities and prices were increased greatly because there were insufficient pairs to be bid in last year. The bid prices were $94. 99 to all markets that they were the highest price for bidding. It was hoped that due to insufficient quantity in bidding market, the high profit rate would be obtained in our strategy. The evaluation in Year 15 Unfortunately, our strategy was completely wrong. Our income revenue was dropped to $282,104,000 and the ranking of our Company B was out of the Top 50. After our critical renew of our strategy, a new strategy was developed in Year 16 to re-gain our position in the market.
The performance analysis in Year 16 The workforce diversity program was applied again. For the branded sales markets, the retail price in internet sales was increased from $72 to $73. The wholesale prices were decreased from $68 to $58(NA), $65 to $60(AP), and $80 to $60(LA). The S/Q rating was increased from 5 stars to 7 stars in AP market. The advertising budgets were reduced from $7,500k to $7,400K in NA and EA markets. In order to reduce our production cost, the superior materials usage was reduced from 50% to 40% in NA and 60% to 50% in AP plants.