Assignment on a business game project
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ASSIGNMENT B: ********
******** Bougachouche Student ID: 16042234 Module title and code: Strategic Management for Competitive Advantage Tutor’s name: Rob Wood Assignment title: Assignment B Seminar Group: Group A Team number: 3 Date of submission: 17th May 2017 Word count: 5500 words
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Table of contents
I. Introduction .............................................................................................................. 3
II. Company performance ............................................................................................ 4 A. Round 1 ..................................................................................................................... 4
1. Decisions ............................................................................................................... 4 2. Forecast and results .............................................................................................. 4
B. Round 2 ..................................................................................................................... 6 1. Decisions ............................................................................................................... 6 2. Forecast and results .............................................................................................. 6
3. Round 3 ..................................................................................................................... 8 1. Decisions ............................................................................................................... 8 2. Forecast and results .............................................................................................. 8
4. Round 4 ................................................................................................................... 10 1. Decisions ............................................................................................................. 10 2. Forecast and results ............................................................................................ 10
III. Trends analysis ...................................................................................................... 12 1. Production ............................................................................................................... 12 2. Total sales ............................................................................................................... 13 3. Sales revenue, Break-even point, margin of safety .................................................. 14 4. Market share vs competitors .................................................................................... 15 5. Unsold stock ............................................................................................................ 16 6. Revenue vs post profit after tax ............................................................................... 17 7. Net cash position ..................................................................................................... 18 8. Current ratio ............................................................................................................. 19 9. Gross margin ........................................................................................................... 20 10. Return on investment ............................................................................................... 21 11. Warranty claims ....................................................................................................... 22 12. Strike days with wages ............................................................................................ 23
IV. Learning ................................................................................................................. 24 1. Strategy ................................................................................................................... 24 2. Financial decisions .................................................................................................. 25 3. Marketing decisions ................................................................................................. 26 4. Operations decisions ............................................................................................... 29 5. Human resource decisions ....................................................................................... 31
V. Conclusion ............................................................................................................. 33
VI. Team performance ................................................................................................. 34
VII. References ............................................................................................................. 36
VIII. Appendices ............................................................................................................ 39 1. Break-even point with margin of safety .................................................................... 39 2. Fixed costs ................................................................. Error! Bookmark not defined. 3. Profit ........................................................................... Error! Bookmark not defined.
Table of figures Figure 1: Summary of ********’s performance over the 4 rounds ............................................ 3 Figure 2: Strategic clock ...................................................................................................... 24 Figure 3: Value chain........................................................................................................... 24 Figure 4: FCB grid ............................................................................................................... 26 Figure 5: Product Life Cycle ................................................................................................ 27 Figure 6: Cost of quality Curve ............................................................................................ 30 Figure 7: Link between HRM and performance.................................................................... 32
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I. Introduction
******** aimed to enter the European hybrid and electric automobile market. The business
objectives of ******** are the following ones:
Over the 4 years, ******** achieved most of its objectives. In regards of the C02 emission, there
was unfortunately no KPI to measure, however it has been predicted that this objective has
been achieved. ******** made profit during the 4 years except in year 1. Over the 4 years, our
total sales increased significantly along with the shareholder funds and the closing bank
balance (Figure 1). Moreover, the company sold out all its cars without having any stock left.
Overall, the company has been successful in achieving its objectives by holding a good net
cash position and by refunding the total loan by end of round 4.
Figure 1: Summary of ********’s performance over the 4 rounds
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II. Company performance
A. Round 1
1. Decisions The market research revealed a growing demand for city and large cars. ******** decided to
target people under 25 as they represent 9,95 % of the city car market and for the large car,
people from 41 to 55 as they represent 6,3% of the total market. The firm produced 17680 city
cars and 22321 large cars because ******** forecasted that large cars will be more sold than
the city cars because of the higher purchasing power of this target. ******** aimed to sell few
number of cars to create a brand awareness among its new customers. Both cars had hybrid
engines as ********’s mission is to provide eco-friendly cars. As ********’s strategy is cost
leadership, Agile was produced with 4 basics options to reduce the cost of production. For the
following years, cars have gone through the product development by adding new features
related to safety and quality. ******** invested also a lot in R&D, although it can be costly, it is
a long return on investment.
2. Forecast and results
******** forecasted to sell all cars and to get £932,36M total sales revenue by capturing 0,35%
of market share for Agile and 0,39% for Revolution. Moreover, ******** allocated more
workforce and automation for Revolution. It was forecasted that large cars will be sold easily
among the specific target.
Although all cars were sold out, ******** made a loss with a post-after tax profit with £-30,33M
because ******** borrowed a high loan of £958M and didn’t produce enough cars to cover its
expenses. Although ******** invested in promotion, R&D and training, they haven’t contributed
to the profit. However, ******** forecasted 3 strike days and results show the same number.
The high loan and the weak number of cars contributed to the loss profit of ********.
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B. Round 2
1. Decisions ******** decided not to launch a new model but rather to concentrate on the two existing
models. At this stage, ******** became well-known that’s why ******** increased the production
of Agile by 300% and by 134% for Revolution. Consequently, the selling prices of Agile
increased by 7% and by 6% for Revolution. ******** bought automation and raised wages by
3 % to improve the productivity. Furthermore, ******** augmented by 90% their promotion to
contribute to their brand awareness but also to the sales. Moreover, ******** decided to keep
the same options as in year 1. ******** was hoping to get more profit and to capture more
market share.
2. Forecast and results
In this round, we started to pay the taxes and to refund the loan. ******** forecasted to leave
2700 city cars in stocks to start the following year with some stocks left. However, ******** sold
all cars. By producing more cars, ******** started making profit. The sales income reached
£2760,83M which is slightly more than it was expected £2721,41M. Furthermore, ********
forecasted 2 strike days and results reached more than our expectations with only 1 strike day.
Additionally, ******** expected £576,82M net cash position, £279,7M post-tax profit and
£366,72M operating profits.
The results show some differences in post-after tax profit and in operating profits. This is due
to the depreciation along with the increase of the promotion costs and the fixed overheads.
Moreover, warranty cost was expected at 200. Results show that warranty costs per car
decreased because of the rise of the salary and the training cost and this had a significant
impact on the quality. Overall, decisions were efficient because ******** started making profit.
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3. Round 3
1. Decisions ******** launched a new medium car for people from 25 to 40 as they represent 13,75% of the
total market. The strategy was to fill the gap between the target for Agile and Revolution.
******** invested £59,9m in automation and created 1300 new jobs. ******** increased their
promotion by 201% because of the launch of the new model. Options have been added
considering the safety, quality and environment. In terms of R&D, ******** added the accident
prevention system to the 3 models for a safety purpose.
2. Forecast and results ******** forecasted to produce 59,783 Agile, 42,768 Revolution, 25,599 Dynamic with 1,26%,
1,7% and 1,92% of market share. Moreover, no stocks left were expected. The productivity
was expected to reach 74,73 for Agile, 61,1 for Revolution and 76,08 for Dynamic. The
warranty cost was expected at 300. Moreover, ******** forecasted £702,12M in net cash
position, £673,5M in operating profit and £531,4M in post-tax profit. The firm was expected 2
strike days.
Results show that ******** met the forecast only for the net cash position and market share.
The operating profit with the profit after tax were slightly different than the forecast and this
due to the increase of the depreciation along with the automation investments. Furthermore,
******** set-up the production too high as a result the productivity was reached with overtime
to produce Dynamic (76,08). The warranty cost per cars increased because ******** didn’t
allocate well the workforce with the automation and it had an impact on the quality. Overall,
******** was concerned about the quality management in regards of the warranty claims.
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4. Round 4
1. Decisions
******** launched a new city car (Triomphe) with an electric engine for people over 55 to meet
customers’ needs. ******** reduced the number of workforce for Agile and Revolution and
rather increased the workforce for Triomphe. Furthermore, ******** invested £60M in
automation and changed the allocation of automation that goes for each car. ******** increased
slightly the production of all models. Its strategy was to produce only 26904 Triomphe cars to
capture the demand from the target.
2. Forecast and results
******** forecasted to sell all cars with a gross margin of 28,77% for Agile, 29,57% for
Revolution, 37,3% for Dynamic and 30,95% for Triomphe. ******** forecasted to reduce the
warranty costs to 300 and expected the strike days at 1. Furthermore, ******** forecasted
£5358,71M in sales revenue, £1424,36M in net cash position, £1070,3M in operating profit
and £867,2M post-tax profit.
Results show that all cars were sold out with higher gross margin than the one expected. The
warranty costs didn’t meet our expectations however it decreased from year 3 to year 4 from
409,64 to 331,33 due to the increase of salary and training cost. Although ******** increased
the wages to 580, the strike days reached 3 because ******** didn’t increase the number of
employees and at the same time ******** augmented the production of cars. The net cash
position and the sales revenue are the same than forecasted whereas the operating profit and
the profit-tax profit were higher. Overall, decisions taken were profitable for ********.
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III. Trends analysis
1. Production
As part of its brand awareness strategy, ******** sold two models for the first two years. In Year
3, ******** introduced a new medium car for people from 25 to 40. ******** decreased the
number of Agile and Revolution and increased the number of Dynamic as the market share for
the medium car was significant during this year. In year 4, ******** launched new few electric
city cars for people over 55 to evaluate the demand among the target. Moreover, ********
increased the number of medium cars by 3,86 % from year 3 to year 4. However, Revolution
decreased slightly from 42768 to 42408 while Agile increased from 59783 to 60480 because
large cars market was declining while city cars market was growing slightly.
Overall, ******** managed to produce effective number of cars considering the market
research.
17680
70720 59783 60480
26904
98904
102729
22321
52377
42768
42408
0
50000
100000
150000
200000
250000
Year 1 Year 2 Year 3 Year 4
******** Car Production over the 4 years
Agile Triomphe Dynamic Revolution
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2. Total sales
******** sales increased from £932M to £5358M over the 4 years with a growth of 474 %. The
launch of two models model in year 3 and 4 contributed to the sales. Over the 4 years, the
sales augmented significantly because ******** was becoming well-known among the
customers. Indeed, ******** developed its brand awareness thanks to the huge expenses on
promotion.
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3. Sales revenue, Break-even point, margin of safety
Due to lack of number of cars production in Year 1, ******** couldn’t break even (Appendix 1).
Indeed, ******** made a loss because cost of production where higher than revenues. During
the following years, ******** produced more cars thus the sales revenue increased from year 1
to year 4 with a growth of 474%. ******** maintained an effective margin of safety. Indeed, the
higher margin of safety, the better it is in diminishing the danger of business losses. From year
3 and year 4, the break-even point decreased because the fixed costs such as promotion and
R&D decreased, it allowed ******** to increase its sales revenue.
Overall, the sales revenues were above the margin of safety and break even over the 4 years
this lead ******** to a profit except in year 1 because ******** didn’t produce enough cars.
832.1 958.7
1,678.9
1,157.7
932.4
2,760.8
4,815.9
5,358.7
0.0
1,000.0
2,000.0
3,000.0
4,000.0
5,000.0
6,000.0
Year 1 Year 2 Year 3 Year 4
Sales revenue, margin of safety with break even point (£m)
Break-even point (£m) Margin of safety (£m) Sales revenue (£m)
Margin of safety
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4. Market share vs competitors
******** market share increased significantly from 2013 to 2016. Moreover, ******** exceed its
goal of getting 5% of market share by end of year 4. ******** main competitors are Ford, Toyota
and Peugeot. Through this graph, Peugeot, Toyota and Ford market share decreased slightly
from 2013 to 2016. ******** produced two more models in 2015 and 2016 that contributed to
the increase of ******** market share and to the profitability of the company.
1.31%
3.61%
5.05%
6.21%
4.16% 4.07% 3.97% 3.90%
7.30% 7.20% 7.70%
6.90%
6.01% 6.05% 6.02%
5.73%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2013 2014 2015 2016
******** Market share vs competitors (%)
Wisent Toyota Ford Peugeot
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5. Unsold stock
Over the 4 rounds, ******** sold out all its cars without leaving any stock left. It isn’t efficient
for ******** because there were no stocks left to start the following year with. Overall, this had
a financial impact for ********.
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6. Revenue vs post profit after tax
This graph shows a major difference between the revenue and the post-tax profit over the 4
years. However, the difference decreased yearly indeed, 103% in year 1, 89% in year 2, 88%
in year 3 and 83% in year 4. Year 1 was a loss for ******** as the profit-after tax is negative
with £-30,33 million. Indeed, ******** encountered difficulties in terms of cash flows because
******** didn’t produce enough cars that could have covered its expenses. However, in year 2,
the revenue increased because ******** increased its production with the selling prices.
Moreover, all cars were sold out over the 4 years which contributed to the revenue.
Overall, the reason behind the significant difference between the revenue and profit is the cost
of sales increased yearly with the inflation as well as the operating profits including the
overheads.
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7. Net cash position
Net cash position decreased by 28 % from year 1 to year 2 because ******** borrowed a high
loan and 50 % of the profit was taken from the bank balance to refund the outstanding loan.
However, in Year 3, the net cash position reached £702,12 million a growth of 21% because
******** was holding higher current assets compared to its liabilities. In year 4, the company
shows a good cash position as the loan was totally refund. Overall, ******** had a good cash
position over the 4 years thus this is a sign of a prevailing financial health for ********.
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8. Current ratio
In year 1, ******** current assets were 17,99 higher than its current liabilities because ********
borrowed £958M loan consequently the firm had enough money to pay its current liabilities.
From year 2 to year 3, the current ratio decreased from 3,73 to 2,77 because 50% of the profit
was withdrawn each year to refund the loan. Therefore, ******** had less cash in the bank
balance. In year 4, ******** managed to sell more cars without handling any outstanding loan.
Overall, this is a good sign for creditors as it demonstrates that ******** is financially reliable to
repay its liabilities within a short time period.
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9. Gross margin
As part of ******** cost leadership strategy, the firm started with low selling price in year 1 to
develop its brand awareness. By year 2, ******** decided to increase the selling price as ********
became well-known. In year 3 and 4, the gross margin for Agile and Revolution decreased
because their cost of production increased however their selling prices didn’t increase.
Dynamic was launched in year 3 with a high margin as it was believed that this car will easily
sell out among the 25 to 40 target. In the other hand, Triomphe was launched in year 4 with a
gross margin of 30,95% because the production costs of Triomphe are costly due to electric
and safety options that were added to meet the customers’ needs.
32.48%
35.65%
31.87%
29.54%
33.76%
35.92%
32.16%
30.66%
39.92%
38.23%
30.95%
28%
30%
32%
34%
36%
38%
40%
Year 1 Year 2 Year 3 Year 4
******** Gross margin (%)
Agile Revolution Dynamic Triomphe
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10. Return on investment
The ROI allows shareholders to analyse how efficient each pound invested in the cars is at
getting profit. In year 1, the ROI was -2,12% which means that the total capital employed was
greater than the income after tax because ******** didn’t produce enough cars. Indeed, the
current costs were higher than the revenues which lead ******** to a loss consequently to a
negative return on investment. During the following years, ******** produced enough cars that
contributed to a positive return on capital. Indeed, the ROI increased from year 2 to year 4
from 22,18% to 40,21% and it even exceeded our objective which was to increase by 5% the
return on investments by end of year 3.
-2.12
22.18
34.06
40.21
-5 0 5 10 15 20 25 30 35 40 45
Year 1
Year 2
Year 3
Year 4
Return On Investment from year 1 to year 4 (%)
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11. Warranty claims
The warranty claims increased significantly from year 1 to year 3 from £11,98M to £82,52M a
growth of 588%. The problems were related to errors in the production lines, in the operations
management and on the wages. As warranty claims were increasing, quality perception was
declining because employees were being resistant to be replaced by automation and because
training investments were low. ******** didn’t meet its objective of reducing by 25% the warranty
claims by end of year 3. However, in year 4, when ******** launched Triomphe, the salary
increased to £580 and the training cost to £2,6M, therefore the warranty claims decreased to
£77,04M.
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12. Strike days with wages
******** started with 3 strike days because ******** didn’t allocate high salary and enough
training. In Year 2 and 3, the strike days decreased to 1 because ******** increased the wages,
the workforce and the training. Indeed, the wages increased from 485 to 580 from year 1 to
year 4 a growth of 19%.
Overall, ******** achieved its objective to reach 1 strike day by end of Year 3. However, the
strike days increased in year 4 because ******** increased the production of cars but didn’t
increase the workforce from year 3.
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IV. Learning
1. Strategy To set up its strategy, ******** used the strategy clock from Faulkner and Bowman (Figure 2).
Indeed, ******** followed the hybrid strategy which combines low-cost and differentiation
strategy (Faulkner & Bowman, 1995). ******** aimed to simultaneously attain higher benefits
and lower prices compared to its competitors. The hybrid strategies are useful to enter rapidly
in the markets and to gain market share.
Figure 2: Strategic clock (Faulkner & Bowman, 1995)
Barney (1991) through its model “The Resource-based View” argues that the competitive
advantage comes from the distinctiveness of the firm’s resources and competencies. In other
hand, Porter (2004) suggests that the competitive advantage can be considered in any of the
primary and support activities in the value chain (Figure 3).
Figure 3: Value chain: Porter (2004)
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2. Financial decisions
Finance is a key element in an organization. According to Khan and Jain (2008), “Financial
management provides a conceptual and analytical framework for finance decision making”. It
is essential for an organization to manage effectively its working capital management to
survive. Indeed, the working capital management is about handling the current assets and
current liabilities with the objective of diminishing the risk of bankruptcy (Liquidity) and
increasing return on investment assets (Profitability). It involves finding a balance between
profitability and liquidity. An effective working capital management leads to the survival and
the growth of an organization (Kargar and Blumenthal, 1994). Similarly, an efficient working
capital management leads to profitability (Padachi, 2006). ******** had a capital of £500 M.
However, a total loan of £958.00 was required to start the business. This loan includes: the
market research, the total car production, data on completion, R&D, the promotion, the training
and the wages. ******** maintained a good cash flow position. Indeed, ******** net cash position
increased yearly expect in year 2 because ******** started to pay back the loan. ********
succeed in refunding the outstanding loan by end of year 4 because ******** had enough
current assets to pay off the current liabilities within a short period. This is an effective financial
sign for ********. Indeed, it reveals that the firm was able to cover its current liabilities with a
mix of cash and liquid assets over the 4 years. Similarly, in terms of profitability, ********
achieved its objective by increasing yearly by 10 % the net profit after tax and by increasing
the return on investment by 5% by end of year 3. In other terms, ******** succeed in achieving
the goal of maximizing the shareholder value. In regards of efficiency, ******** was using the
Just-In-Time inventories management to eliminate the need to hold inventories. That’s why
******** had no inventories from year 1 to year 4 (Atrill, & McLaney, 2013). However, “if a
business lowers its inventories, then it must reorder frequently, which increases ordering costs”
(Brigham, & Ehrhardt, 2014). Indeed, ******** started every year without any stock left which
had a negative impact on the assets of ********.
Overall, ******** maintained a good cash position and profitability. The financial decision had a
significant impact on the external stakeholders such as creditors as it shows that ******** is
financially reliable and it had also an impact on internal stakeholders such as the shareholders
as the company maximized their shareholder value.
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3. Marketing decisions
Kotler and Keller (2009) states “marketing is a significant dimension of any business in today’s
highly competitive environment and financial success is often depending on marketing ability”.
Drucker (1954) argues “Because it is the purpose to create a customer, any business
enterprise has two and only two basic functions: marketing and innovation”. When giving brand
name to its car models, ******** considered that a brand should be memorable, meaningful,
likeability, transferrable, adaptable and protectable (Pelsmacker, Geuens, & Bergh, 2013).
******** name has been selected because it refers to a strong European animal. Agile reflects
the easiness to drive around in the cities, Revolution reflects the innovation, Dynamic reflects
the energy and Triomphe reflects the success. ******** unique selling proposition is
“maximizing lifestyle while minimizing footprint”. Indeed, ******** corporate social responsibility
is concerned about environment by providing eco-friendly cars. In terms of positioning, ********
produces eco-friendly cars with high quality at low prices thereby providing a good value for
money to their customers. It is the keystone of the hybrid strategy that ******** follows. ********
considered the hierarchy of effects models for setting its objectives. According to this model,
consumers follow different stages in responding to marketing communication such as the
cognitive, conative and affective stage. Moreover, Vaughn (1980) developed the FCB grid
where he explains that buying a car is a high involvement thus it is considered as cognitive
element (Figure 4).
Figure 4: FCB grid (Vaughn, 1980)
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Using the DRIP model (Pelsmacker, Geuens, & Bergh, 2013), ******** focused on the
differentiation of its models and on developing its brand awareness. ******** targeted people
under 25 for Agile, people from 25 to 40 for Dynamic, people from 41 to 55 for Revolution and
finally people over 55 for Triomphe considering the market demand but also the market size.
******** based its strategy on the marketing mix which involves 4p's: product, price, place and
promotion (Kotler and Keller, 2009). During the introduction stage, ******** aimed to create
brand awareness among early adopters (Figure 5). Thus, ******** invested high amount in
promotion such as TV, digital media, promotional offers and dealers incentives. In terms of
pricing, ******** used the product life cycle as a reference. ******** used the penetration strategy
to quickly enter in the market by getting high market share (Ansoff, 1965). Moreover, ********
used the psychological pricing with odd pricing to attract irrational buyers by encouraging
impulse buys (Kotler, & Armstrong, 2013).
Figure 5: Product Life Cycle (Kotler and Keller, 2009)
******** became well-known during the growth stage; the objective was to create interest
among innovators. ******** invested a lot in R&D and in promotion to differentiate from its
competitors thus the selling prices increased slightly. Indeed, ******** followed the product
development strategy by adding customized options and the warranty services to meet
customers’ needs. During the maturity stage, ******** aimed to maintain brand loyalty. Thus,
******** launched a new car to diversify its brand models. Finally, ******** reduced its advertising
during the decline stage to sustain its loyal customers. It is recommended at this stage to cut
down the selling prices (Proctor, 2014). Due to wrong decisions, ******** didn’t cut the selling
prices for Agile and Revolution. However, ******** decided to launch a new electric city cars for
people over 55 to meet their needs.
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Overall, the marketing decisions impacted the internal shareholders in terms of profits and
market share and the external stakeholder such as customers in terms of promotional offers,
competitors and suppliers in terms of lower selling prices.
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4. Operations decisions “Operation management is the activity of managing the resources that create and deliver
services and products”. Patnaik (2015) states “operations management involves system
design and operating decisions related to product and service design, capacity planning,
process selection, location selection, work management, inventory and supply management,
production planning, quality assurance, scheduling, and project management”.
According to Shim and Siegel (1999) operations strategy is concerned by putting in place rules
and plans using the firm resources effectively and efficiently to contribute to the company’s
long term competitive strategy. ******** corporate strategy relied on its core competences to
develop its long term competitive strategy. Hamel and Prahalad (1990) argues that core
competencies are developed through continuous improvement. Barney (1991) suggests that
core competencies should be Valuable, Rare, Inimitable, Non-substitutable. ******** core
competencies were based on high skilled professionals in management, high technology along
with production which make them distinctive from their competitors. The quality characteristic
of ******** is the core competence thanks to its heavy expenditures on R&D that contributes to
the product development. ******** strategy was to invest a lot in automation to get higher
productivity because it generates lower costs and helps to become more competitive
(Stevenson and Van Ness, 2001). Indeed, productivity is fundamental for companies that have
low cost strategy, because the “higher the productivity, the lower the cost of the output”
(Stevenson and Van Ness, 2001). ******** competitive advantage was based on innovative
eco-friendly cars using the lean management. With continuous improvement in their production
using the lean management, it has the ‘just in time’ production which gives high efficiency in
production (Heizer and Render (2011).
Over the 4 rounds, ******** relied on the total quality management by following the “doing it
right first time” procedure. ******** focused on the doing right first time approach by preventing
defects and meeting the requirements (Crosby, 1996). Moreover, ******** emphasized on the
continuous improvement through a Plan-Do-Check-Act cycle to constantly improve the system
of production (Deeming,1986). ******** operations seek to influence the speed, the flexibility,
the differentiation, the reliability, and the costs of its products and services. During year 3, the
productivity went down while the warranty claims increased. Therefore, it had a negative
impact on the quality. ******** could have taken corrective actions by spending on appraisal
costs (field testing) and prevention costs (quality planning), so it will have reduced the internal
(failure analysis) and external costs (warranty costs, complaints) to zero defects (Figure 6).
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Figure 6: Cost of quality Curve (Wood, 2013)
Finally, ******** didn’t manage well to have an efficient continuous review system through its
inventory level. Heizer and Render (2011) mentioned that “you can never achieve a low-cost
strategy without good inventory management”. Slack, Brandon-Jones, & Johnston (2013)
mentioned that a less amount of inventory can have a negative impact on customers demand
and on financial revenues. Overall, the operations management had an impact in terms of
product quality on internal stakeholders such as owners but also on the external stakeholders
such as customers.
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5. Human resource decisions According to Beardwell and Thompson (2014) “HRM is concerned with recruitment, selection,
learning and development, reward, communication, teamwork and performance
management”. ******** hired 1400 workforce and invested 7 million in automation in year 1.
From year 1 to year 2, the company increased the number of automation to improve the
productivity. Consequently, the productivity increased from 44,45 to 82,06. In year 3, ********
increased the number of employees to 2800 however the automations were the same as in
year 2. As a result, the productivity decreased to 71,95. In year 4, the productivity increased
to 83,04 as ******** increased significantly the wages to 580. However, ******** set the goal to
achieve 120 productivity per cars/worker however this hasn’t been achieved because ********
didn’t allocate enough employee and automation for the number of cars. In regards of the
warranty costs, it decreased from year 1 to year 3 from 299,42, to 211, 45. After we introduced
a new model in year 3, the warranty cost reached 409,64 because ******** didn’t allocate
enough training. This had an impact on the quality. In year 4, when we launched another new
model, we increased the salary to 580 in year 4 and the training cost to £2,6M, thus the
warranty costs decreased. In regards of the strike days, one of ******** objective was to get 1
strike day by end of year 3, this has been achieved however one incorrect decision in year 4
increased the strike days to 3. In terms of wages, employees were paid in the first year £485
which was the average given by the competitors. Then, the wages were raised yearly, £500 in
year 2, £520 in year 3 and £580 in year 4. By increasing the wages and the training, ********
aimed to get a better productivity, better quality and employee motivation. Similarly, Pfeffer
(1998) suggests that high wages and extensive training are linked with the company
performance. Furthermore, Guest (1997, cited in Armstrong and Baron, 2002) suggests that
“HR practices influence HR outcomes, which in turn leads to lower absence and labour
turnover and increased productivity and quality and these in turn should lead to an increase in
sales and profitability. In other words, effective performance is attained through the people
within the organisation (Figure 7).
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Figure 7: Link between HRM and performance (Guest et al, Effective People Management, CIPD, 2000)
******** was concerned about the importance of continuous learning for sustaining competitive
advantage. That’s why the company used the performance management to monitor their
employees’ results (Beardwell and Thompson, 2014). To keep them motivated, ******** was
giving them incentives and rewards. Indeed, people are motivated if they know that they will
receive an award if they achieve the target (Vroom, 1964).
Overall, the decisions had an impact on internal stakeholders such as the employees in terms
wages and training but also on external stakeholders such as the owners in terms of strike
days.
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V. Conclusion
Over the 4 years, ******** succeed in achieving its objectives apart from some wrong decisions.
The company contributed to the maximization of shareholder value by holding a good return
on investment along with effective net operating profit across the 4 years. Moreover, the
company managed to reduce the strike days to 1 by end of year 3 by thanks to the yearly
increase of the wages. However, ******** reached its goal of 5% of market share by end of year
4 thanks to its diversification of its range of products. Moreover, ******** was also closed to the
target in terms of productivity because ******** didn’t allocate enough employee and
automation. Finally, ******** missed its target in terms of reducing the warranty claims by 25 %
by end of year 3 because the company didn’t effectively manage on the allocation of
automation and production lines.
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VI. Team performance My team included 4 members: ******** was the Marketing manager, Percy was the Financial
manager, ******** was the HR manager and myself I was the Sales manager. Tuckman (1965)
suggested that a group should go through four stages: forming, storming, norming and
performing. During the forming stage, we introduced to ourselves. Then, we looked at what we
were good at by looking at our Belbin roles. Percy is resource investigator and specialist, he
is good at finding out efficient and specific information. ******** is shaper and implementer.
******** is more team worker and completer finisher. Finally, myself, I am a shaper, completer
finisher and co-ordinator. We agreed that I will be the leader of the group. Our meetings were
held every Monday from 9:30 to 12:30 but sometimes also after class. All the members were
on time with the required work done, except one member who was late and missed two times
the meetings for personal reasons. On the other hand, Percy and ******** were good at finance,
so they were in charge of the Finance and Operations. ******** was in charge of the strategy
part. While I was having a close look at all the decisions, I wrote the report and my part was
the marketing. During the norming stage, I started arguing with one the member who always
showed up late to the meetings with her baby. Moreover, this member didn’t focus on the work
but rather on her baby which somehow, I can understand because we all have a personal life.
However, her work contribution wasn’t effective. We discussed about it and she became aware
that changes in her work are needed to successfully work in a team as her Belbin roles shows
that she is a good team worker. After this conflict, the communication between us was better.
At this norming stage, we knew the tasks to be done for each team member considering their
skills and competences. All the decisions were taken together. As a co-ordinator, I motivated
the team to develop commitment and unity in the group. Gradually, we moved to the
performing stage where we collaborated to achieve the tasks. Constructive feedbacks were
given to develop self-awareness and self-development. Finally, I believe that my team was
successful because we all behaved as adults and we took this business game as a serious
task. We all contributed to this game by bringing harmony, and eagerness to complete the
tasks considering our strengths and weaknesses.
Personal-reflection:
I fully contributed to the team by being on time to the meetings and by preparing in advance
the work to be discussed. Belbin (2012) reveals that I am a shaper and completer finisher.
These two features describe well the role of a leader. This has also been confirmed by MBTI
test (Bayne, 2002), as it suggests that I am an executive. As a shaper, I contributed to the
team by taking responsibility over the collective tasks to ensure that the objectives are met.
My Belbin profile suggests as a completer finisher, I tend to be perfectionist by going beyond
35
what is required. Indeed, I thrive on work where quality is important. As a co-ordinator, I tended
to clarify the objectives and helped everyone to focus on. However, I admit that after few
weeks, my role of co-ordinator went down. Indeed, my shaper and completer finisher role took
control over my co-ordinator role. I was more task-focused rather than people-focused. Indeed,
I tended to take ownership in a team role when I saw that the contribution from other members
was decreasing. Moreover, it was really challenging for me to delegate the tasks as I doubt
that anyone will bring the same amount of work consciously as me.
Overall, if I had to re-do this business game, I would work on myself first to be more people
focus instead of task-focused. I should be aware that maybe one of the team member was
going through difficult times during the game. As a future manager, I need to first care about
my employees’ feelings and emotions to contribute to the success of the firm. Moreover, I
need to learn to delegate effectively to avoid the overwhelming of the workload.
36
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VIII. Appendices
1. Break-even point with margin of safety
2. Fixed costs
3. Profit
