Project 3: Simulation as a Tool for Strategic Decision
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Sample2_Project3_Analysis.pdf
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MBA 670 Project 3
Individual Analysis
MediCorp
United States of America
MBA 670 Strategic Decision Making
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Project 3 Analysis Directions: Write your answers below each question. Please do not delete the questions.
1. What strategy were you implementing? Give examples of any three decisions over the four
rounds that were consciously driven by your chosen strategy. Explain.
In this simulation, we used the niche differentiator (high tech) which included high end
performance and size. This market strategy gave MediCorp’s product a higher standard to lead
the industry in quality and value. The report revealed if keeping R&D cost and production cost at
a minimum the company will maintain their quality and value in the market. For example, round
1 was used as a test to see how the customers would react to the product, so the cost for R&D
stayed low and the automation for production as well to maintain the value foundation within the
market. Next in round 2, the cost remained the same, but because the value of the product among
customers were high the cost was able to increase due to the quality of the product. The price
started at $32.00 to $38.00 for high end. Lastly, the automation was increased over the rounds to
decease the labor cost and increase the margins on the product.
2. Which country and customer(s) did you target with your product (high tech, low tech, or
both)? Why? Give examples of two decisions in R&D and two decisions in marketing that you
implemented over the four rounds to enable your desired targeting.
The country that we selected the USA. Our team followed Niche differentiator strategy which
mainly targeted the high-tech market segment. In the R&D sections, we started the performance
and size at 6.4 and ended at 6.5 for the course of each round. If you revise a product’s Speed or
Accuracy, customers will perceive your product as an upgrade, and the age will be cut in half
(R&D Help Sheet, n.d.) and we did not want customers to think of our design as being young.
We entered the market at a steady pace to gain recognize from high end customers. The need for
a steady speed was to penetrate the market and become a well-known brand with high end
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customers. Another decision was to keep the service life in between 19,000-21,000. The reason is
because customers want quality in the product they are buying and needs to know it will be
reliable for many years. In marketing, we based our decision on value and quality looking at the
outcome of sales. We raised our price from $32.00 to $38.00 based on the outcome from the
sales prior. Our actual units sold were more than our potentials. Another decision was to keep the
promo budget low at $1,000. This because our product would be well known due to value and
quality, not much money would be need for promo.
3. In the market segment that you were focused on, what do your customers want most? Did your
market share for the country where your products are sold change over the four rounds?
Comment on how it changed and why.
In our market segment, the customer satisfaction was most important. The market share for
the USA did not change throughout the four rounds and stayed at 43.7%. By staying the same
over all rounds means that the company was not obtaining much profit on the profit being
products. Even though we were not profitable over the rounds, almost half of the market owned
our product and our teams were the leader in the market.
4. Did you meet your potential demand in Round 1? Round 2? Round 3? Round 4? Hint: Look at
Section 3 of the report (marketing). If you observed a stockout (inability to meet demand) in one
or more rounds, pinpoint the reasons behind each instance.
The marketing strategy was to provide value and quality. Moving forward through the rounds,
we did experience stock outs on some of the products. This occurred because the customer’s
ordered past the inventory that was kept on hand. We should have increased the forecast in
production stage for more inventory on hand to ensure the customer needs were being met.
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5. Based on Section 1 (High Level Overview) of the Round 1 Report, how did your sales results
compare to those of the other five teams? If your sales results were extreme (top two or bottom
two among the six teams), explain what other than sheer luck, caused that to happen. In other
words, what decisions in Round 1 might have caused your sales to excel or suffer in comparison
to its competition?
In the high-level overview on the Round 1 report, we had an increase in sales. Our team sales
were $102,556 putting us in 4th place among the other 6 teams. We knew in the beginning that we
would need to make our presence known by providing a value and quality product into the
market. With the high contribution margin of 52.36% we knew there would be a need for more
overhead expenses. We took the approach to improve the product awareness and accessibility for
consumers while monitoring the spending on promotion and sales. This made more funds
available for R&D and Production, to produce accurate forecast so that the finance departments
could plan accordingly. I believe in round 1 we should have produced more products and
increased our money in sales and promo to compete more in the market.
6. Based on the Round 4 Report, were your sales after Round 4 higher or lower than your sales
after Round 3? How do you explain this change in sales in view of your team’s decisions in
Round 4?
The sales for both round 3 and 4 stayed the same at $102,556. Looking at the reports there
were a few things we could have done differently. Under the R&D, I believe we should have
increased the speed and accuracy and produced more products to meet the customers demand to
ensure there was no stock out. Under production, the automation increased from 5.7 to 7.7 in
rounds 3 to 4 which positively impacted the profit margins by reducing labor costs. The
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marketing department responded to the strategy of providing value and competing based on
price, increasing from $38 to $45.
7. Did you need an emergency loan in any of the four rounds? If so, why? If you did not need an
emergency loan in any of the four rounds, explain the decisions that you made to ensure that
your company would not need an emergency loan to survive.
Based on the reports we did need an emergency loan of $17,478. Reviewing our cash flow
statement, the is a greater number of outflow of cash than the inflow of cash. Here is what we
should have done: focus more on short-term debt which would have provided us the funds to
invest more in the early rounds. If that were done, we have could have had enough cash to cover
short term debts for the next years. We also could have used more stocks to raise funds. We were
starting each year with a zero-dollar starting balance.
8. Explain your capacity decisions, including whether or not to use a second shift in each round.
Compare the available plant capacity in each round (first and second shift) versus the number of
units produced. Was there idle capacity in any round? Is it possible that you could you have used
capacity more efficiently while increasing your plant utilization? Explain why or why not.
Capacity is the number of units you can produce in a full year when running your
production line 24/7 (Production Help Sheet, n.d.). We decided to keep our capacity idle at 1,700
in each round meaning we can produce 3,400 units with 2 shifts. In each round our second shift
was 203. This was very critical for establishing our product in the US market. We were utilizing
our plant under 200%, so therefore would not be a need for a plant relocation. I believe we could
have used our capacity more efficiently because it could have assisted us from inquiring an
emergency loan. If we increased our capacity allowing for a lower automation, which would save
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on the labor making the need not necessary to invest in automation. As automation increased the
higher the automation the cost of production would rise.
9. See Finance Section of the Round 4 report. At the end of Round 4, do you have any current
debt? Explain the presence or absence of current debt at the end of Round 4. At the end of Round
4, do you have any long-term debt? Explain the presence or absence of long-term debt at the end
of Round 4.
Reviewing the end report for round 4 the is a current debt of $17,478, which is the amount of
the emergency loan borrowed. This is debt will be a future transaction for the outflow of cash.
The presence of the current debt means that our team ran out of cash during the year and needed
funds to cover expenses. There is long term debt is a total of $31. The presence of this long-term
debt is from the loan and our team took longer than one year to pay the money back. To avoid
these debts, I recommend investing in the company early and look at common stock to help with
any debt accrued early on. I believe we could have used our funds wisely for a better outcome in
the simulation.
10. Did your team’s decisions in Rounds 1–4 always align with the chosen strategy? If you found
yourself deviating from your strategy, explain why. In hindsight, what decisions would you have
made differently? Explain.
I think we stayed on our chosen strategy of niche differentiation (high end), but slightly
deviated. We stayed on track of providing a premium product that gave quality and value to
customers. There were certain decisions that could have prevented us from needing an
emergency loan and avoiding being stocked out of some products not meeting the needs of
customers. Below is a highlight of how niche differentiation should have run through the four
rounds.
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Targeted markets that are high end to improve the performance and size
R&D strategy is to ensure the customers expectation is satisfied
Marketing strategy is to base decisions on price on the market’s expectations
Production strategy is to increase the product margin by increase the automation
Finance strategy is to issue long-term debt during the start of production and use
stock to raise money
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References
Production Help Sheet. (n.d.). Capsim. Retrieved from
https://ww3.capsim.com/modules/GIA/files/1_0/0/CapsimGlobal/EN/PDF/Production
HelpSheet.pdf
Research & Development Help Sheet. (n.d.). Capsim. Retrieved from
https://ww3.capsim.com/modules/GIA/files/1_0/0/CapsimGlobal/EN/PDF/R&DHelpS
heet.pdf
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