Business Management Laboratory (BML) Assessment Written Report

Business Management Laboratory (BML) Assessment Written Report

Our group for the simulation was Firm 1. Throughout, the simulated quarters we tried to deliver a higher quality product to our customers at a favorable price. We applied various strategies to control our cost so that we could complete against our competitors.

Mission Statement
Our mission was simple, deliver a better product at an attractive price to our customers. We thought we could control our cost and at the same time compete with our competitors on the profitability side while offering a durable and affordable product.
Stakeholder Identification

We felt that the importers were pure stakeholders and we tried to offer better quality products with the same price. When the imports shift their strategy we would look to do the same. In fact, when price of the imports changed we analyzed and looked whether we should do the same with our price and if the price needs to be changed, we would then look for ways to match the difference on the cost side of the business.

III. External Analysis: Identification of Industry Opportunities and Threats
If we applied porter's 5 forces we find that the industry is low attractive.

1. Bargain power of buyers is lowly attractive. When a customer is interested in the purchasing dishes, they have a list of many companies that they can buy. Because their aren't hand full of companies making dishes. Also, with cheaper labor over seas, the importer are able to match the quality of made in U.S.A dishes with cheaper price. Which in turn hurts the attractiveness of some of the domestically manufacturing companies. Since there is so much choice, the industry is lowly attractive.

2. Bargaining Power suppliers is highly attractive. The material used in the process of dish making is vastly available. Since there are a lot of supply of raw materials and many companies which sell it, a buyer of the raw material is not limited to buying from only few companies. Which makes this industry highly attractive.

3. Treat of new competition is Medially attractive. If someone wants to open up a factory to produce dishes, they are not have a difficult time in terms of equipment and material. However, they are going to need experienced workers and large working capital to get things rolling. The investment included a warehouse, various machinery's, and experienced work force is to name a few. Since there is large capital requirement, this the treat of competition is limited and makes the industry medially attractive. It is not highly attractive because of the number of existing competitors and the variety of similar products with in the market are numerous.

4. Treat of a substitute is highly attractive. There aren't any substitutes to dishes. People need to put their food in something when they eat and paper plates is possible but not a direct competitor. The reason people use dishes is that they are durable and can be reused many many times. On the contrary, paper plates don't need to be washed but they cost more because they cannot be reused. In fact, as going greener intuitive, many reform groups discourage the use of paper plates because they require the cutting of trees. Because there is no direct substitute, it makes the industry highly attractive.

We have two highs, one low, and one medium which makes this rivalry among the competitors medium.

In answering the question whether there were broad economical issues. Yes,there were macro-environmental changes that positive impact on our industry. Throughout the simulation we had an booming economy which positively impacted few companies within our industry. We think this impacted us negatively because we were focused on providing a superior product at the lowest cost. This lead us the sacrifice some advertising and engineering budget. Since, we did not invest enough out side of the our company and focused on lowest cost we missed the big picture. The big picture was that when the economy is doing great people have more discretionary spending and they tend to buy the products that they are familiar with and don't base their purchase decision on cost alone. So, our competitors which were selling the same product for a higher price and using that inflow of cash in advertising, won. They won because their product was better reckoned and since the economy was booming folks are willing to buy a higher end item.

IV. Internal Analysis: Resources, Capabilities, Competencies, and Competitive Advantage
I think we had a disadvantage due to our lowest price model. We tried to be profitable as we could buy controlling cost by buying futures, investing in maintenance, limiting salaries with higher commissions, and trying to sell everything we produce in the same quarter so that there are no extra cost of unused inventory. However, we soon realized that we needed to changed direction to a higher profitability model. This model called for increasing price and maintaing the same cost structure. There were no barriers to growing competencies with our firm but I really felt that we needed more time with the new direction of the firm. In the same quarter of the new strategy, we suffered by having a loss but the next quarter proved to be profitable proving that it was a good idea. And with changing market conditions the firms that adapt and innovate become the leaders of the respective industry.

V. Business, and Corporate-Level Strategy
Throughout the simulation we used various creative corporate level strategies we executed. Hiring was a focal issue among the group members. We tried not have too many sales people because it is really costly to train them and pay them. So, we monitored closely the performance of the sales force and decided the right decision relating to new hires, fires, salary and commission. In the quarter 2 of 2005, we noticed the economy the due for an expansion and we decided to hire and salesman to A1, after a careful analysis we notice that it affected majority of the salesmen and their performance decreased. After that experience, we were reluctant to hire or to increase the compensation of the sales force.

VI. Performance Assessment
Our firm focused on price. That strategy made us one of the top revenue generators with in our industry. We succeeded in living up to our mission statement by controlling cost and price. We shifted course at the end by analyzing the economy and the other sucessful firm which were making more profit than us.

VIII. Implementation of Strategic Change
If the simulation continued for additional periods, I would continue with the new strategic direction enforced last quarter and monitor closely the results of the firm. If the economy continued to expand, I think we would continue to perform better in terms of bottom line. But, if the economy showed signs of slowing then I would evaluate the different scenarios present at the moment and go with the one that makes the most sense.

Diagnosing Strategic Problems

Often many companies go off track from what their original objective of being in business was. Now it might not be their entire fault, it could be the economical/social factors are working against them. For this reason shareholders pay top dollars to the managers the keep the ship a float. What is that job? It is called strategic management. Strategic management is the art and science of formulating, implementing and evaluating variety decisions that will enable an organization to achieve its objectives. It is the process of specifying the original objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives. So, why do many companies fail? It is because the management forgets or fails to implement this definition. Lets look a couple of early indicators of strategic problems.

Firm needs to create a solid image for it self if it wants to achieve a lasting profitability. They often get bad press in the media for a lawsuit or any questionable action on the hands of the management. A company like wal-mart is the exceptional example. It has done nothing wrong but to implement their strategy of cost leadership and growth. They have been so successful at this that they a seen as to small business destroyers. In other words, wal-mart has trouble opening new stores because they are seen to be anticompetitive on their price, much so that they will drive out their small competitors out of business. Wal-mart have become a victim of their success. They are so good at what they do, the media and the public persona has given them a bad name. Personally, I think that if a merchant is offering an identical product at a lower price, then why you would want to buy it any where else.

A company needs to be focused on their direct business. That is why many economists disapprove companies diversifying. They argue that, a business needs to focus on what they a selling when they look to diversify that business they lose that niche focus leading into financial distress. A company like GE, which is involved in so many unrelated and related businesses, is a perfect example. How can the board of directors hire a management team which has experience in all of their businesses from finance to aviation to media? GE competes in many markets which mean its earnings are well protected from a decline, many diversification supporters say. But it a company offer so many different products and services that are miles apart how can it focus on each a every one item to maintain and expand its market share? Shareholders may diversify companies within their portfolio at a lower cost than a company trying to diversify buy buying another unrelated business. Shareholders want to company to excel in the market it competes in and if the management has too much on their plates they might not be able to achieve that goal.

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Business Strategy

The most important decision facing the management of a firm is the business strategy of their firm. Not only they have to be original but they have to be creative and be innovativing their strategy to gain market share over time because that is the point of being is business. There are number of ways the firm can gain market share; lowest price, first player in the market, technology, uniqueness of the product or service. etc.

It is important for a firm to be different from its competitors. What Apple computers did earlier part of this decade transformed to digital music players industry. Although they were not the very first player into the digital music market, in the fall of 2001, they created a unique product and defined the market. If you have been living under a rock for a couple of years, this product is Ipod which is a digital music player that plays your downloaded digital files from computer. Now you might think why would a computer maker get into a different market in which they have no experience? The answer is simple to diversify their products and to take advantage of the new opportunities in the market place. Apple knew that this industry may be profitable and created a business strategy to create a product and a complementary service iTunes.com which allows one to buy all types of media to put into Ipod. In this way they are helping out the struggling music companies by selling their music and at the other end selling Ipod to enjoy that music to go. Now there were many other digital music players makers in the industry before Ipod was introduced, then how did Apple attract market share? through innovation of deigning. Music player were ugly back then with less functions while Ipod looked sleek (sexy) with multi function and could store hundreds of songs. The design attracted the buyers and the iTune service made them royal customers. Ipod's design have succeeded so much that it is regarded as a fashion statement more than a digital music player.

Cost is essential to most people. In other words, If you could buy the same product from a different retailor at a lower price, why won't you. In the world that I live in under normal circumstances, a person will always do to the cheaper retailer. This business strategy is executed perfectly by Walmart. Lets not confuse walmart as being the lowest price retailer but how they are focused on the costs of running the business through their regional warehouse channels that enables them to maintain the best prices. Since walmart buys items in largest quantity, they have regional warehouses where it stores and ships the inventory to its retail locations. Some of these warehouses are more than 50 foot ball fields. Because of this strategy walmart is major customer to individual companies and to thousands of their customers around the world. Another firm I could think of that used similar cost strategy by using just in time inventory was Dell. Their business strategy of selling directly to customers lead them to be dominant player in their industry while at the same time offering the most competitive prices in the industry. By using just in time inventory and directly selling to buyers of their products, they didn't have to worry about volatile computer component price, since they didn't have lots of inventory costs that lead them to offer the best prices. The company is struggling because they did not innovate through time and lost market share to rivals. However, since the founder Michael Dell took over the CEO position, they have been innovating their business model and now started to sell their products in retail stores.

As I have pointed out business strategy is essential in the success of a company. In addition, it had to been creative and innovative for one firm for it to maintain competitiveness and market share. Some companies have diversified their businesses at the same time innovated different business strategies and enjoined great profits while other like Dell have a great business plan but they have recently struggled because they did not innovate.

Porter’s 5 Forces

The 5 Forces Model considers the degree of power that current and new competitors, suppliers, buyers, and substitute products have in the industry. The more power each group of players has, the less attractive the industry To come to the conclusion, Porter requires you to make a determination of the degree to which each of these forces contributes to the attractiveness/unattractiveness of the market/industry: HIGH/MEDIUM or LOW. The weaker these forces, the more a firm can increase price and make above average profits. This makes the industry a more attractive proposition.

The forces are: potential competitors, substitutes, bargaining power of buyers, and bargaining power of suppliers.
Example Industry Telecommunication

Potential competitors: LOW
If there is a relative ease of entry in the industry, then it will me highly competitive. One firm will always need to come up with new ways to protect its market share. ex. food market stand. On the contrary, if there is mass initial capital required for entry, there will be few players. ex. telecommunication. and be less competitive. When there are only two(Verizon and AT&T) the more the attractive the industry.

Substitutes: LOW
Less the product is unique the more the industry will be competitive. There is no substitute for a phone service. For decades the Telecommunication have not innovated. Why? they don't need to. Because they have a monopoly of the services offered to customers and the customers have no choice but the pay up for these services.

Bargaining power of buyers/suppliers: LOW to Medium
In the phone service arena there is no shopping around for the cheapest plan. Rather, the companies give you a hand full of narrowly price plans. LOW
Suppliers to the telecoms. Suppliers have a LOW to limited bargaining power.

Porter’s theory of analyzing attractiveness of an industry is brilliant. In fact, it covers all of the major components from customers to suppliers to substitutes to competition. It is important to analyze all of these factors with great detail within an industry to understand the attractiveness and the future outlook of the players within them.

So using porters 5 forces we discovered that the Telecommunication industry is highly attractive given its barriers to entry, lack of competition, and bargaining power of the customers. Good industry to put your money in.

Mission Statement

Mission statements are the first step in the development of an organization’s strategic direction. It is developed when an Firm has planned its key business or social goals, and basically a mission statement is a summery of goals forwarded into few lines or paragraph.

It is true a mission statement varies one company to the next, but it ought to if management wants to peruse and attract others into their business. A Mission Statement could me outlined as task, vision, values, and goals to say the least. A good and compelling mission statement encompasses all of the necessary ingredients needed to be better then the next guy while preserving the values of the participating members they play a vital part in the business. And to best mission statement I could find was from google:

"Google's mission is to organize the world's information and make it universally accessible and useful.

As a first step to fulfilling that mission, Google's founders Larry Page and Sergey Brin developed a new approach to online search that took root in a Stanford University dorm room and quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- an easy-to-use free service that usually returns relevant results in a fraction of a second.

When you visit www.google.com or one of the dozens of other Google domains, you'll be able to find information in many different languages; check stock quotes, maps, and news headlines; lookup phonebook listings for every city in the United States; search more than one billion images and peruse the world's largest archive of Usenet messages -- more than 845 million posts dating back to 1981.

We also provide ways to access all this information without making a special trip to the Google homepage. The Google Toolbar enables you to conduct a Google search from anywhere on the web, while the Google Deskbar (beta) puts a Google search box in the Windows taskbar so you can search from any application you're using, without opening a browser. And for those times when you're away from your PC altogether, Google can be used from a number of wireless platforms including WAP and i-mode phones.

Google's utility and ease of use have made it one of the world's best known brands almost entirely through word of mouth from satisfied users. As a business, Google generates revenue by providing advertisers with the opportunity to deliver measurable, cost-effective online advertising that is relevant to the information displayed on any given page. This makes the advertising useful to you as well as to the advertiser placing it. We believe you should know when someone has paid to put a message in front of you, so we always distinguish ads from the search results or other content on a page. We don't sell placement in the search results themselves, or allow people to pay for a higher ranking there.

Thousands of advertisers use our Google AdWords program to promote their products and services on the web with targeted advertising, and we believe AdWords is the largest program of its kind. In addition, thousands of web site managers take advantage of our Google AdSense program to deliver ads relevant to the content on their sites, improving their ability to generate revenue and enhancing the experience for their users"

I think although long but this mission statement summed it all. From the history of the company to the different ways the company helps businesses and consumers out. It seems to me like a company that makes its money by helping others but it not in non-or-profit business. Companies like these are rarely to find. Which is the reason why I think this mission statement is one of the best.