Strategic Management for Competitive Advantage: BIM Ltd. Report

This report analyzes the performance of BIM Ltd., a company participating in a business simulation focused on the European car industry. The analysis covers the company's strategic decisions, financial outcomes, and market share performance across multiple rounds of the simulation. It examines key performance indicators such as revenue, profitability, and market share, comparing actual results with forecasts. The report highlights critical issues faced by the company, including overhead costs and investment decisions in research and development. It details the rationale behind strategic choices, such as investments in new models, production adjustments, and employment decisions. The report also provides a comparative analysis with competitors, assessing BIM Ltd.'s position within the market. Furthermore, it evaluates the impact of market predictions and customer factors on the company's strategic direction, ultimately offering a comprehensive overview of BIM Ltd.'s performance and strategic management approach within the simulated environment.

STRATEGIC
MANAGEMENT FOR
COMPETITIVE
ADVANTAGE

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
COMPANY PERFORMANCE.......................................................................................................2
CRITICAL REFLECTION.............................................................................................................2
CONCLUSION................................................................................................................................3
TEAM PERFORMANCE...............................................................................................................3
REFERENCES................................................................................................................................6

INTRODUCTION
This assignment will lay emphasis upon Business with International Management (BIM)
organization which is a limited liability company located in Newcastle, United Kingdom. Main
business objective of BIM Ltd. is to enhance their market shares by 5% and profitability by 8%
in the third year. In tis assignment overall performance of company in the game will be
explained with description of level till which team members have successfully achieved their
main business objectives. Company had been successful in expanding their market share till a
certain extent and they are expected to grow their market share by 3 percent next year. Below
given details will help in explaining closing bank balance, unsold stock, shareholders funds etc at
the end of round 4.
Cash flow with opening bank balance
Opening Bank Balance 211.26
Revenue 5347.35
Extraordinary events
Wage Costs 240.61
Total Overheads 729.66
Factory Cost
Redundancy Costs
Automation Expenditure 21.60
Loan Repayments 105.63
Tax Payments 47.99
Bank Interest 52.84
New Model Production
Costs
Closing bank balance
Balance Before
Loan 341.53
New Loan
Closing Bank
Balance 341.53
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Shareholders funds
Share Equity 500.00
Total Retained Profit (Loss) 863.51
Total Subsidies
Total Shareholders Funds 1,363.51
Total sales by product size
Team Small Medium Large Luxury
1: BIM 90608
1: BIM 64069
1: BIM *12170
1: BIM *50962
COMPANY PERFORMANCE
Round 1
Round 1 forecast of key performance measures
It was forecasted that car market will rise from 13.0 m to 13.2 m cars sold. There will be
changes within small car market next year, medium car market is also expected to show a little
change over, large car market is expected to grow by around 3% and luxury car market is
expected to grow by around 6%.
Forecast for Round 1 included Minimum target production that was required to be
produced and sold. Minimum target market production for Round 1 for market sector 6 was
42,000 whereas, target minimum forecasted production for Round 1 for market 1 was 44,000.
Market share for market 6 was forecasted 0.87% whereas for market 1 it was 0.84%.
Market Sector Model Name Target Production
6 M-21 42000
1 S-21 44000
Market
Sector
Model
name
Produced Sold In Stock Model
Price
Market
Share %
6 M-21 42000 42000 0 22535.40 0.87
1 S-21 44000 44000 0 16089.60 0.87
2

Comparison of Round results with forecast
If Round 1 results are compared to forecasted resulted then it can be said that Minimum
target production of Medium and small car production was achieved successfully i.e. Minimum
target market production for sector 6 and target minimum production for market 1 was achieved
successfully. Not only this all the produced medium and small cars produced were also sold. But
if it is compared with key performance measures then post tax profit i.e. sales percentage wa in
negative i.e. it was not as forecasted.
Total profitability of BIM company was £-17.84 m. in terms of turnover and profitability
BIM was on second position. On first position its top competitor was there named RAVEN
Motors pvt. Ltd.
Figure 1 Turnover and profitability of BIM and its companion with competitors.
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It identified that overhead cost of vehicles was one of the main reason company suffered
loss.
Key issues that were raised
Key issues that were raised during Round was or key issues identified because of which
overall profitability was reduced are due to excessive over head cost such as: fixed overheads,
Stock upkept cost, Product Recall Cost, promotion, Research and Development, Professional
Charges, Warranty Claims and Training Cost.
Decisions of Round 2
In order to bring improvement within overall performance of BIM organization following
decisions were taken. BIM has announced new investment of £1 m in automation. They have
also announced new investment of £4 m in Research and Development. This cost will be used to
enhance Fuel Efficient Engine of Medium cars within 3 years. As large car and luxury car
market is expected to grow so they had announced the forthcoming launch of a new model.
Round 2
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Round 2 Forecast
It was forecasted that car market for small car market is expected to grow by around
10%, Medium car market is expected to grow by around 7%, large car market is expected to
grow by around 8% and luxury car market is expected to grow by around 17%. Inflation this year
was 2.40% and is expected to be around 2% next year.
Forecast for Round 2; minimum target production for small vehicles in market sector 1
was 66,000, target minimum forecasted production for medium car production o market 6 was
63,000, and target market for large vehicles for market 12 was 9000. Market share for market 6
medium sized car was forecasted 1.29%, Market share for market 1 small sized car was
forecasted 1.26%, and Market share for market 12 large sized car was forecasted 1.55%.
Market Sector Model Name Target Production
6 M-21 63000
1 S-21 66000
12 L-22 9000
Market
Sector
Model
name
Produced Sold In Stock Model
Price
Market
Share %
6 M-21 63000 63000 0 23748.66 1.29
1 S-21 66000 66000 586 16765.06 1.26
12 L-22 9000 9000 0 64802.00 1.55
Comparison of Round results with forecast
As per the forecasted results minimum target production was produced and sold for all
the three models. But there was difference in actual sales of all the three models of cars. Small
cars were sold more than target production, and medium and large car were sold in slightly less
as compared to target number.
Due to high sales of small car models Post Tax Profit / Sales % was positive i.e., 6.95%.
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If turnover and profitability of BIM is compared to its competitors then BIM was on third
position and made profit of £219.97 m
6

Key issues that were raised
The main issue in Round 2 that was faced by the company is overhead cost. If these
actual results are compared with forecasted results, then it has been identified that overhead cost
of company was still quite high. Overhead cost include: fixed overheads, Stock upkept cost,
Product Recall Cost, promotion, Research and Development, Professional Charges, Warranty
Claims and Training Cost.
Decisions of Round 2
In order to bring improvement within overall performance of BIM organization following
decisions were taken. BIM has announced that 2000 new jobs have been created, new investment
of £12m in Research and Development will be done, increase in production of M-21 (sector 6)
model will be done by 50%, increase in production of S-21 (sector a) model will be done by
50%, and they have also announced the forthcoming launch of a new model because it was
forecasted that Luxury car market is expected to grow by around 17.
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Rationale for Round 2 decisions
The main reason because of which these decisions were taken because of market
predictions that were made, that were: car market is expected to grow 13.2 m to 14.4 m cars sold,
small car market to grow by 10%, medium car market to grow by 7%, large car market to grow
by 8% and luxury car market to grow by 17%.
Round 3
Profit and loss and production are two most important indicator along with products sold
and in round 2 gross profit was £867m for BMI. Profit after tax for BMI was £219.97m and there
was no opening stock and this suggests that in Round 1 BMI was able to sale all its stock to
customers because of which no opening stock was there in Round 3. Performance of round 2 is
basis for decisions and forecast of round 3. Regarding production and product sole by BMI M-21
and L-22 both were best performing models of BMI and sale of both these products was 100%.
This means that BMI sold all the models of M-21 and S-21 that it produced in Round 2. In
relation with this in Round 1 BMI sold all models of M-21 and S-21 that it produced however
performance of S-21 was not as good as in Round 1 and its models were not sold. However in
Round 2 BMI introduced new model L-22 and its performance were also very good. Rationale
for decisions in Round 3 were mainly based on performance of BMI in round 2 and how
different products performed in round 2.
Decisions taken in Round 3 included that no investment will be made in any new model
and regarding model decision included 2 models of M-21 available in 2 sizes and for 2 age
groups. In round 2 there was no decision taken by company on expenditure on anything new or
neither there was any information about reduction in expenditure of the company. However,
there was decision taken for launch of new model and production of S-21 and M-22 was also
decided to increase in round 2. However in round 3 there was decision to reduce production of
M-21 and increase of L-22 that was taken and the reason behind this was strong performance of
L-22 model of BMI. In round 3 creation of 4000 new jobs was also announced by BMI. In round
2 there was unsold stock of S-21 model and this is why production of S-21 and increase in
expenditure for S-21 was not considered for S-21 model in round 3. In round 3 it is noteworthy
that all 3 competitors of BMI increased their promotional budget and there was no decision of
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BMI regarding promotional budget and it shows that promotions have not been given importance
by BMI however, it does not mean inexistence of promotion and promotion budget by BMI. As
it was announced that 4000 jobs have been created by BMI majority 2500 workforce was
allocated for M-21 model and least 1500 workforce was allocated for L-23 that is new model
launched by BMI. In this it is very important to note that performance of M-21 model that is first
model of BMI and is constantly performing well since starting. This is why it is important that
M-21 is focused by company however it has also been identified that product lifecycle of M-21
is 3 years and this is why in round 3 production of M-21 was reduced by BMI.
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Key issues:
The major key issues include raising expenditure with regard to promotion and
advertisement above expectation. A more expenditure is also seen in the R&D. Likewise, raising
overhead along with raising the cost of stocks and product also act as major issues with regard to
the company. In short raise in the expenses beyond expectations are the major issue.
Decision for round 3:
The decision was related with creation of 2000 new jobs. Along with this its decision also
include raising of production of M-21 model by 50%. It was also decided to raise the S-21 model
by 50%. In addition of this company also made decision related with launching of new models.
Rationale:
The reason of taking these decisions include a market prediction which shows that the
market with respect to small cars will raise by 10%. It was also expected that the market of
medium car will be increase by 7%. In the same manner the expectation also includes 8% rise in
large cars, 17% rise in luxury cars. Hence with increase in demand of cars and favourable market
situation decisions are taken.
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