Final Blog: Simulation

I. Mission Statement- From the beginning of the simulation, our main goal is to turn the company around and make it a profitable company. This mean more revenue, less cost and maximize net income. During the middle of the way, we realize that net income is not going to give us an A, so we decide our new goal will be concentrated on the 7 criteria that will be graded on.

II. Stakeholder Identification- In the beginning of the simulation, we are hired to turn this company around. So the stakeholder will be the old management group, board of directors and finally the stock holders. They are ultimately the boss of this company. There are no influence of them on our strategy formulation

III. External Analysis: Identification of Industry Opportunity and Threats-

1. Threats from new entrants- Since there is no regulation for this Industry and it doesn't require a lot of capital investment, it is easy for entrants to rise in this industry. Hence low attractiveness.
2. Rivalry within the Industry- There are 7 companies we are competing and also and importer. This is a very competitive industry. Hence low attractiveness.
3. Power of buyer- Dish ware are very elastic, people can use disposable dish ware(paper and foam). Or they can simply eat out. Hence low attractiveness.
   
4. Power of supplier- The basic make up of a dish ware are clay and coat-paints. They are simple raw material that can be purchased anywhere. Hence low attractiveness
5. Substitutes- There are a lot of substitutes out there. There are metal dish ware, disposable paper and foam dish ware. The cost of switching is very low. Hence low attractiveness.

Overall the porter 5 analysis has a rating of Low attractiveness for this industry.
There a few quarters that the stock market had swing. The first time it was around 2nd and 3rd quarter of 05, where all the companies stock price were low. And at around the 2nd quarter of 06 the stock market goes up, raising the stock price of group 4 to more than 7 dollars. Also few companies reached 6. Stock price is one criteria is being graded on. This price influence our decision to buy/sell our stocks.

IV. Internal analysis: Resources, Capabilities, Competencies and Competitive Advantage- Every company in this industry started the same. At the beginning we offer 11% commission to our salesperson and also 3500 salary. And we lower our product price to 49.99($2 drop). Our purpose was to sell more than the other group. And everyone agreed to this strategy. However this strategy turned out to disastrous, we sold a lot products, but our profit margin was very low. and the cost is very high. We needed up with 2 quarters of loss. Then we tried to increase the price of the products and lower the commission and salary. Although we sold less products but it turn out to be profitable. The average industry price keep going up, and we followed.

V. Business and Corporate-Level Strategy- At the beginning we don't have much finance activity but later on we start to realize it is impossible to win this simulation if we don't get into the Corporate-Level Strategy. We financed through issuing bonds and we also bought back some stocks. We tried to boost the earning per share and reaching the debt-equity ratio to 1.

VI. Performance Assessment- If we started correctly, we will be able to finish the first or second place. But we started very bad and then have two consecutive quarter of loss. We expanded new capacity very late and this cost us a lot of sub-contract money. We tried to catch up, it was a bit too late.

VII. Implementation of Strategic Change- If this simulation continued for additional periods we will change our strategy in the middle, we gave up R&D and Engineering after the 1st quarter of 06 because it takes 3 period to become effective. If the simulation continued, it will be worthwhile to put more money into R&D and Engineering. I would also expand a little more on new capacity, since we are running OT and sometimes even sub-contracts. Sub-contracts is the killer of the profit margin.

My view- Over this simulation is exciting. The result is anticipated every time when decisions are inputed. The most difficult thing to do is to settle the right policy with team members. Everyone has their views of how this simulation works. And we won't able to know which view is better unless there is also a simulation for individual strategy. The fact that the 7 criteria is worth equal weight is not fair. A company can make a little profit but still can score high grade if they follow the criteria correctly. But in the end it is the profit that counts. Overall a Corporation is a for-profit organization.

Who got problems?

1) Company has too many legal suits pending-If a company has a lot of legal suits pending, it will definitely affect the future of the company. If the company lose a case that required them to pay a huge amount of fine in settlement, it will reduce the profits of the company. It could even bankrupt the biggest company.

• Philip Morris is an tobacco company. It has be proven that smoking causes health issues. Lung cancer is the #2 most common cancer, and smoking increases this cancer. Many people has file suit against Philip Morris. It has paid a lot of money for the lawsuit already. It is likely that Philip Morris has to pay huge amount of money to settle these lawsuit that keeps on coming.
  

2) Outmoded, fully depreciated technology - Technology has been an important factor in determining productivity. Since technology is getting better day by day, it is important to keep up the pace with the new technological machines. If one company has a new machine, it will do better than other company that has a outmoded machine, holding everything else constant. So an outmoded machine will make a company lose its competitiveness in the industry.

• United States once dominated the steel industry. It was the leading producer and export the most steel in the world. But recently US steel industry has been losing the market share to countries like Korea and China. The machine that US steel uses is built long time ago. Korea and China just recently built the machines. These machine are more modern. These machines are more technological advanced than the machines that US steel companies use. They are much more productive than the outmoded US steel machines.