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University of Westminster Westminster Business School Simulation Board Report Blue Word Count: 997 Student Name: Derick Gan Yew Yi Student ID: w1592755 Seminar Leaders: Sangeetha & Kevin Table of Contents Introduction3 Analysis of leadership and group dynamics3 Analysis of Strategies4 Pre-Merger Business Unit Strategy: Image Cars4 The Focus on quality4 Post-Merger Strategy6 Post-Merger Business portfolio6 Market Development: Image cars7 Market Penetration: Low Cost and Family Cars7 Conclusion8 References9 Appendix10 Introduction This report outlines the strategic and management decisions made by my group for the 21st Century Car Challenge which is a car manufacturing simulation. The simulation is based on the sale of four distinguish car range along with weekly decision being made to optimise production. This report starts with leadership analysis accompanied by the strategies before pre-merger and post-merger before ending with a conclusion. Analysis of leadership and group dynamics In the Blue team, there are two different leadership styles adopted. Firstly, democratic leadership was used in the group where a final decision will be made by a leader through the meetings of the members of the team (Bhatti, et al, 2012). This style enables the company to hear each member’s opinion on the decisions and the final decision is decided by the leader. However, adopting the democratic leadership was difficult as the response from other members were very limited and slow. Hence, Autocratic Leadership was adopted where (Farg and Cheng, 2000) states a leader behaviour of asserting strong authority and control. Where it enables the leader to demand their subordinate to achieve the best performance among the organisation and make all the important decisions (Zhang and Xie, 2017). Hence, as members were not contributing, the group decided a leader. Analysis of Strategies Pre-Merger Business Unit Strategy: Image Cars Image cars were engineered and design for customers seeking for luxury, status, performance and adrenaline; these customers have a relative inelastic demand where they have low sensitivity to any changes in the prices (MEGA Learning, 2017). In region 1, the market growth rate stands at 5% per annum and has the highest rate in facility investment (Mega Learning, 2017), this defines that achieving economies of scale prove to be difficult leading to a lower earnings potential for this segment. However, this means that price wars will not put the company at a disadvantage due to the nature of the market segment. But this segment’s competitiveness relies heavily on the quality of the cars. Thus, we implemented a focused differentiation strategy for our image car segment (Porter, 1985), where Tanwar (2013) states that it is where a firm gains a competitive advantage through effectiveness rather than efficiency. Hence, we decided to compete by increasing the quality and the value of the car compared to our competitors before the merger. The Focus on quality Being an image car, we tend to focus on the overall quality of the cars through performance, design, robustness and technology. Although, this has made us incur the use of huge amount of capital in terms of cost (figure 2), our main focus was to attract as much demand through engineering appeal (figure 1) and market share (figure 3) as possible with quality at the start to retain the loyalty from customers. Figure 1: Engineering Appeal for Image Cars Figure 2: Price and Cost for Image cars Figure 3: Market Share of Image cars in Region 1 However, the high engineering appeal brought a disadvantage to the company. At the beginning the firm did not invest much capital into facilities as cash were limited and loans were not adopted, hence this causes demand to outweigh supply by 30%. Hence this caused our market share to fall slightly as competitors ramped up production and competitiveness. To counter this problem, increasing the price and reducing the engineering appeal was adopted to curb demand as shown in figure 2. Post-Merger Strategy During period 8, the company underwent a horizontal integration or expansion to another region. Our strategy for region 2 was based on Ansoff’s Theory (1957) for each individual segment (figure 4). Figure 4: Post merger growth strategy Source: Remodel from Ansoff (1988), taken from Lynch 2015 Post-Merger Business portfolio Bringing forward from the performance of region 1, we continued the low-cost (LC), family and image cars. Using the BCG growth share matrix, we identified that image cars are star product for region 2 due to their high growth rate and high market share. We recognise family as cash cow while low-cost as star product. According to Lynch (2015), cash cows’ product should be used to fund stars product while dog’s product are products that are unlikely to be major profit earners. Due to the poor financial performances incurred in region 1 along with the relatively weak growth potential of the eco cars in region 2, we have decided to discontinue our production. This enable us to use the spare funds to invest into our image cars. Figure 5: BCG Matrix for Blue Team Source: Adopted from: Lynch (2015) Market Development: Image cars In region 2, we started market development strategy for image cars not only due to the high profitability, but also its lucrative high growth rate of 15% (Mega Learning, 2017). Additionally. we decided to bring our highest quality into the new region to gain as much market share as possible and we expect to dominate the market from the confidence of our quality cars. We manage to obtain a full 100% market share (Figure 6) from period 10 onwards in this segment giving us ample amounts of positive cash flow to our company for that region. In period 10, there was a one-off surge in sales partly due to the clearance of previous inventories as image cars were not completely sold off due to the low marketing investments where Ansoff states the importance of promotion (Ansoff, 1957). Figure 6: Market share in region 2 Source: Mega Learning, 2017 Market Penetration: Low Cost and Family Cars LC and family cars were already available in region 2, therefore we aimed to become more cost efficient and try to get as much market share through engineering qualities. We adopted market penetration strategy for both segments. This merger allowed us to achieve economies of scale allowing us to produce higher volumes compared to region 1. Conclusion The adoption of focus differentiation strategy for image cars resulted in a good value proposal for our customers along with producing high qualities cars gave us a competitive advantage in Region 1. However, the shortage of supply and capital along with mistakes, capped our advantage in both regions. Nonetheless, image cars continue to see strong demand and hence surge pricing is introduced to tighten the gap between demand and supply. Overall, even though our weekly decisions were not quite aligned with our corporate strategy, it was overall a satisfying success in terms of the different aspects such as what was learnt and experienced and how we overcome ad hoc problems throughout the simulation. References Ansoff, H. I. (1957). Strategies for Diversification. Harvard Business Review. (Vol. 35 Issue 5, Sep/Oct). pp.113-124. Bhatti, N., Maitlo, G., Shaikh, N., Hashmi, M. and Shaikh, F. (2012). The Impact of Autocratic and Democratic Leadership Style on Job Satisfaction. [online] Available at: http://dx.doi.org/10.5539/ibr.v5n2p192 [Accessed 25 Apr. 2019]. Farh J. L., Cheng B. S. (2000). “A cultural analysis of paternalistic leadership in Chinese organizations,” in Management and Organizations in the Chinese Context eds Li J. T., Tsui A. S., Weldon E., editors. (London: Macmillan;) pp.84–127. Lynch, R. (2015). Strategic Management. 7th ed. Pearson Education 2015, pp.318-319. Porter, M.E. (1985) Competitive Advantage, Free Press, New York, 1985. MEGA Learning (2017). The 21st Century Car Challenge in Westminster Business School: Global Strategic Management Module. Tanwar, R. (2013). Porter’s Generic Competitive Strategies. IOSR Journal of Business and Management, 15(1), pp.11-17. Zhang Y., Xie Y. H. (2017). Authoritarian leadership and extra-role behaviors: a role-perception perspective. Manage. Organ. Rev. 13147–166. 10.1017/mor.2016.36 Appendix Market Development However, other than this, we have consistently fell short of supply and in response, we increased price significantly to reduce the gaps. But this prove to be difficult as our company is the sole monopoly to operate this segment, hence increasing prices may not lead to a fall in demand. 1