Mgmt 4650 - 03 strategic management

MGMT 4650 - 03 Strategic Management

In the beginning of 2016 our company Digby, was established in the electronic sensor industry. At this time, five other companies also established themselves within the industry. We along with Andrews, Baldwin, Chester, Erie and Ferris all began with an equal market share of the industry. Equally an industry conditions report was provided to inform us of customer’s preferences which included age, performance, size, price, and mean time before failure (mtbf) every year. Within a given time frame of eight years and resources needed to grow our businesses, the environment was set for us equally. Well aware of drift rates and customer’s ideal spot (calculated using Exhibit 1) on the perceptual map, set the industry conditions. Industry trends included five product segments -Traditional, Low End, High End, Performance and Size. Where each company’s products would place on the perceptual map each round was solely based on each company’s individual strategies which we will discuss Digby’s internal strategy to achieve external results.

Strategic Intent

This leads to Digby’s sweet spot, which would be our high automation and superior financing. These two aspects help us dominate our market. Our corporate level strategy was value-creating. We wanted to edge out our competition in as many categories as possible. We created new products in segments, and that helped us sell more products and gain more market share. The only section we weren’t as aggressive in was the traditional market because it was too heavily saturated. We made sure we kept our prices competitive though, so that we can still sell products within that section. Our business level strategy was to ensure we had everything running smoothly and effectively. We monitored how each segment reacted, based on the previous rounds and would adjust accordingly. This is where our R&D, marketing, production and financing departments did extremely well.

The strategic management concepts we used during this simulation were goal setting, analysis of strategic form, strategy re-forming, strategy implementation and strategy monitoring. Some of the tools we used were brainstorming, internal & external analysis, VRIO testing, S.W.OT analysis, industry trends, strategic intent & strategy, and many more.

Strategic Financial Analysis

Our goal was to establish a strong hold on the market in every category, from traditional to high end products while developing multiple new products. Exhibit 2 portrays how we instituted ourselves by the 8th year throughout the market. The first couple of years, our aim was to not look for immediate profits, but to invest into the future of our company by expanding production and capacity. Exhibit 3 shows how in our first two years, our sales were slightly above the industry average. The growth of our sales increased at a consistent rate, and comparing to other companies, we established ourselves as a dominant firm in our industry. So, while we were committing our company to look towards the future, we sustained and surpassed industry averages in many ways. Next, taking into account the expenses for our multiple products and research and development, we calculated our total profits and compared them to the industry. Exhibit 4 shows this comparison. This is where you can see that our investments were much higher in first couple of years because we made less money than other firms who were looking for more of a quick initial profit. Our eventual profits reached over $100 million more than the industry averages by year 8.

The market has been growing at a steady pace of 13% in unit demand each year, with an expected total unit demand on the entire industry set around at 68971 units. Now to keep up with this growing demand we have set a roadmap in which we tend to follow. Therefore, to accomplish the task of obtaining 50% of the overall market share, in 2026, we plan to acquire businesses in the industry, such as Andrews and/or Chester. Chester is one of lower performing industry that is having trouble keeping up with consumer demands. Since they currently hold 3 products with a market share of 23.89% in the traditional segment, we would hold 48% of that market segment if acquired. In the following year, we tend to increase R&D spending to better suit consumer needs and invest more into the traditional and low-end segments. These two segments consist of 60% of the whole industry. Therefore investing in these two segments, which we currently don't hold the most market share for, would be beneficial. As for the following year, we tend to offer new products in the marketplace. We currently hold the most market share in the high-end (50.52%), performance (45.52%) and size market (44.9%). By offering new products in any of these or the ones we currently don’t dominate in would only help in achieving 50% of the overall market. Lastly, we will continue in investing in various areas such as R&D and Production to further grow our company and in maintaining our dominant position in the industry.

Success & Failure Evaluation:

Introduction of 3 New Products:

We launched a total of three new products between rounds 2-4: Daisy, Doot, and Duff. Launching these products during the early years allowed us to have 40-50% market share in the segments high,size, and performance, while we still maintained a 30% market share in the traditional and low end markets (Exhibit 2). Having so many products, a total of 8, allowed us to monopolize the market, and earn cumulative profits of over 300 million.