Business Research Assignment | Case Study on Digby

WRITE CAPSIM FINAL REPORT AS PER ATTACHED PDF Need references for any valid quotes or points. Definitely need charts, graphs etc to support report.

[FINAL COMPANY PERFORMANCE SUMMARY - CPASIM]
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Final Company Performance Summary
{Student/Group Name}
{Name of the university}
February 18, 2020

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I. Company Organization:
The sensor industry was a monopoly until the year 2014 when the government decided to
break the monopoly and split the industry into 6 players. It was then Digby was formed to
manufacture and sell sensors used almost everywhere including cars, smartphones, appliances,
elevators, etc. leading to huge demand for the product and also high potential for growth.
A successful venture is a business that is managed by highly skilled individuals working
together as a team to achieve the goals of the company. For Digby we are a team of 4 people,
each with a different skill set working in cohesion with each other to emerge as the leader of the
industry. Our team members had varied skills, experience and expertise and at the onset we
delegated the responsibilities among ourselves to stay focused to each area of the business.
We carefully allocated the work among ourselves in the team where each member was
required to take decisions in one department of the organization and co-ordinate with the others
to understand the impact on the others. We then would sit as a team to see how individual
decisions affected the wider picture and come to consensus for all the decisions. The allocations
of department are as under:
Allocation of Work
Sl. No. Member Department Allocated
1 Kevin R&D
2 John Marketing & Production
3 Gary Human Resource & TQM
4 Jackie Finance
We allocated the marketing and productions to one team member as both of them are
interlinked, we cannot sell without production and similarly we cannot just produce without
selling. The member was responsible for fixing the price, sales and promo budget, forecast sales
and then produce enough in the production team to ensure we do not go out of stock nor do we
overstock.
Similarly, we allocated HRM and TQM to one member as both of them are linked to
improving efficiency of the business. The R&D and finance were controlling the repositioning of
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the product and managing the funds requirement of the business respectively. At the end all of
use would have a session together to review the decision summary for all departments.
II. Initial Strategy:
Out of the 6 basic product strategies, the strategy that we chose for our company was
‘Niche Differentiation Strategy’. ‘Niche Differentiation Strategy’ focused us on competing in
only the high tech product segments, which includes high end, performance, and size segments.
We opted out of traditional and low segments in the first round itself by discontinuing the
products and invented one new product for the high segment.
The aim of our initial strategy was to cater to the needs of the buyers in the high tech
segments by differentiating the offering from the competitors in terms of performance and size.
We chose the nice differentiation strategy as that builds competitive advantage in the industry by
use of excellent designs which are fresh and new, high awareness in the market, and easy
accessibility for the products. This strategy enables us price the products at an above average
price for customers looking at technologically advanced products.
For the ‘Niche Differentiation Strategy’, we targeted the high, performance and size
markets as they are populated by customers looking for premium products and are also ready to
pay a higher price for the advanced products. We would rate our strategy as 6 out of 10 as we
were able to improve our sales from round 1 to 8 indicating we sold more by creating demand for
our premium products. We also incurred low inventory cost indicating what we produced was
getting sold and we were stacking only what was necessary but at the end of round 8 we made a
cumulative loss of $7.2 million indicating there were areas where we did not perform well. There
is always a scope for improvement and thus we are rating as 8 considering there was no
boundaries or ceiling on sales and we could have sold more.
III. Strategy Evolution
As we move ahead in the game with each passing rounds, we focused on creating niche
differentiation in the high tech segment by producing premium products. For this, in the initial
round, we sold off our entire production capacity for products in traditional and low segment, as
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we did not want to offer any products in this segments. We started off with low production level
based on benchmark prediction.
As we progressed further, we repositioned our product portfolio to align it with the needs
of the high tech customers, this repositioning included increasing the MTBF. The MTBF or the
Mean Time Between Failure differentiated the offering and matched our strategy of “Niche
Differentiation’ for the company.
We changed our strategy of playing with the sales and promo budget where with the
passage of rounds we spent more to create a buzz for Digby in the market. At an overall level,
we stuck with our initial strategy of creating a niche differentiation and added products in the
portfolio that matched with the strategy. The evolution was in marketing our offerings,
repositioning them based on customer needs and competitors offering with each passing round,
and pricing them at an above average price.
IV. Impact of Competition
Business never runs in isolation and all of us work within an industry that has many other
players. The same is true for us where we are working in the sensor industry with 5 other players
and each one of us aspires to become the leader in the industry. With the passage of each round,
the capstone report gave us a chance to look at the performance of our peers and realign
ourselves to become more competitive.
As we gained access to the competitors products, we aligned our products to adjust them
not only on the basis of customer needs but also ensured that they are better than what our
competitors are offering to the industry. For example, we adjusted Adam and Adam12 with the
best specification of high performance and low size and that garnered 16% market share in the
segment. Similarly, we hold 24% market share in performance segment and 21% in size
segment. This was after we decided to reposition our products based on competitor’s
information.
Further, in the first 2 rounds we struggled to make our products accessible and failed to
create customer awareness and product accessibility. We learnt this the hard way, after reviewing
the results for our competitors who invested heavily in sales and promo budget. We followed the
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trend and revised our decision to invest $11,274,000 in sales and promo budget in round 3 to
increase our awareness and accessibility.
It was after our competitor analysis that we invested in TQM and HRM initiatives to
improve the efficiency of our staff and lower costs to increase profitability. Competitor analysis
is one of the best tools to understand the industry standards and realign to meet them.
V. Presentation of Results
Its time to review our results, and at a glance things have flared well for us where we
have been able to register a consistent growth in our sales and profits over the 8 rounds. An
analysis on the sales and profit for Digby in as below:
We see that we have been able to register a growth in our sales consistently till round 6,
after which we struggled for some time and then regained ourselves. In the first 4 rounds, we
ended with losses as we incurred huge costs on sales and promotion, R&D for the offerings in
the portfolio, invention of a new product in the portfolio, high MTBF leading to high material
costs, and also invested in TQM efforts to reap benefits in future period. We started getting profit
from year 4 onwards but at the end of round 8 still had a cumulative loss of $7.2 million that will
easily be covered in next round if given a chance.
The ROS or the return on the sale increased from 0.2% in round 1 to 14.7% at the end of
round 8. This indicates that with increase in sales our profits are also increasing and we are able
to work on our costs. The Year on Year ROS is as under:
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Round No. 1 2 3 4 5 6 7 8
ROS 0.20% 3.70% 6.10% 11.00% 12.30% 16.50% 15.40% 14.70%
A comparison with others in the industry reflects that we are better than some but still has
a long way to go considering there are players in the market that has been able to generate an
ROS of more than 14%.
The Stock price is the reflection of the potential that the investor sees in the company.
For Digby, the stock prices over the periods in the simulation are as under:
Round No. 1 2 3 4 5 6 7 8
Stock Price $1.00 $1.00 $1.00 $1.00 $8.44 $27.56 $4.83 $19.15
We see it was a very poor performance in the initial rounds and from round 4 onwards,
the market saw potential in our products and we were able to create a niche for ourselves in the
industry. Creating a niche in the market is a matter of time and it took us 4 rounds to establish
ourselves as a player offering niche differentiation for technology oriented customers by offering
highly advanced sensors at a slightly higher price.
Our balance scorecard scores over the rounds are as under:
Round No. 1 2 3 4 5 6 7 8
Balanced Scorecard 14 23 37 62 68 77 54 73
The balanced scorecard also reflects on our struggle in the initial rounds and how we
flared well as the rounds progressed. There was a jump in the score by over 40% as we moved
from round 3 to 4 as by then our portfolio was established with niche differentiation. To achieve
this we focused on R&D efforts, built a new production facility for the newly invented product,
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invested in TQM in order to gain competitive advantage, and opted for long term financing to
save on high interest that comes with short-term loans and emergency loans.
Times have been tough initially. In our endeavor to create a niche for ourselves, we sold
less products initially and registered losses owing to high costs. However, we continued with our
strategy as we were confident on our offerings and that’s exactly what happened afterwards. The
main contributing factor to this was low budget on sales and promotion initially which did not
create ample customer awareness nor made the products accessible. We increased our budgets
for sales and promotion in round 3 from $6,520,000 in round 2 to $11,274,000, which is 73%
increase. This increased our accessibility to 100% and awareness to above 90% and thus we sold
more and improved profitability as we progressed.
VI. Future Approach
At the end of round 8, Digby made a cumulative loss of $7.2 million, with a ROS of 6.9% and
net contribution margin of 32% as against 46.7% of Chester. If given a chance to run the
company for next 5 years as well, the following are the changes that we would target to bring to
our company:
1. We would have worked on our costs, in an attempt to reduce our material, labour and
inventory cost. We are currently incurring variable cost of 68% on our sales ($91,559
costs against sales of $134, 714) that is on a higher side.
2. We would add a new offering for the ‘Size’ segment considering the segment is expected
to grow at 18.3% next year and currently we have only one product in the segment called
Dune that is high demand and thus adding one more product will increase our sales.
3. We would revamp our strategy by repositioning our products in endeavor to make it more
suited to the changing needs of the consumers and increase market share from current
6.4% to at least 15% in next 5 years.
4. We would increase our automation in the production lines to at least 3 for all lines.
Currently we have an automation level of 2.5 for Dome.
5. We would continue our efforts in the HRM and TQM areas that would improve our
efficiency, lower the employee turnover, increase demand for our products, lower the
time to move in the perceptual map and build goodwill in the market.
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With all the above actions combined with consistent efforts in sales and promotion budget, we
intend to revamp our offerings, expand our market share, reduce costs and improve overall
profitability of Digby.
VII. Team Effectiveness
The journey of virtual business through the specialized Capsim program was a roller
coaster ride and it was as challenging as exciting. We as a team were intimidated at the onset
with the idea of running a virtual business, but as we went through it and progressed in the game,
we became confident and enjoyed the fact that we are our own bosses.
Capsim programs is about running a business and business never runs in isolation, it is
teamwork, effective decision making, leadership, and efficient delegation among many other
things that make or break an organization. In our team of 4 members, we worked in complete
cohesion with each other. We were able to successfully delegate various functions to each team
member for departmental focus and then we would meet as a team to see the overall picture after
the decision.
We worked really well as a team, where individually we focused on delegated areas of
the business and then took collective decision at the end of the round to ensure no area is ignored
at the cost of other. Business is not about working in silos but about inter departmental
communication and teamwork. Our team respected each other’s decision and each one of us
strived to be a team player by understanding the point of view of others and arriving at consensus
every time for each decision. Another aspect to all the teamwork was after the rounds were
processed, we would analyze the impact of our decisions and understand areas for improvement.
At this point no team member was hesitant to accept the mistakes and improve them in future
rounds.
We believe that our results has been good considering we were able to improve sales,
profit, ROS, balanced scorecard through our journey from round 1 to round 8 consistently. To
improve our team performance further, we could have all worked in all areas together, exploring
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all the 6 basic strategies, communicating often for each decision to be made in all areas of the
business and growing stronger as a team.
Overall, Capsim Simulation has been a wonderful experience and today when we look
back at our journey, we would say everyone contributed well and everyone was professional in
their approach with clear instructions available from the professor.
Thank you for such a wonderful journey of learning while doing!
Bibliography
http://www.capsim.com
Junni, P., Sarala, R., Taras, V., & Tarba, S. (2013). Organizational ambidexterity and
performance: A meta-analysis. Academy of Management Perspectives, 27(4), 299 - 312.
O'Boyle, I., & Hassan, D. (2013). Organizational performance management: Examining the
practical utility of the performance prism. Organization Development Journal, 31(3), 51 -
58.
CAPSIM and Peregrine Student – Getting Started
Attachment: MBA6010_Student Registration - Getting Started_Capsim-Peregrine.pdf
Capsim. Strategies for Ethical Reasoning.pdf. Retrieved December 13, 2019, from
http://ww3.capsim.com/modules/downloads/ethics/pdf/Strategies_for_Ethical_Reasoning
.pdf
Capsim. Reports. Retrieved December 13, 2019, from
http://ww3.capsim.com/student/portal/index.cfm?template=reports.reports
Corporate social responsibility (CSR). Retrieved December 13, 2019, from
https://www.iisd.org/business/issues/sr.aspx
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