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Capsim Final Report

3940 words - 16 pages

1. Initial Strategy
The initial strategy was to maintain a competitive presence in each segment by keeping our prices aligned with the average for each target market, while maintaining costs low. Specifically, it was our goal to become the leader in Traditional and low-end segments of the sensor business by allocating significant resources to R&D, marketing and promotions for these products. Our differentiator would be the result of a high investment in R&D to ensure our products were the best available.
The board decided that the company should be judged on its ability to make a profit, gain market share, provide positive ROA and make money for our shareholders with an increasing ...view middle of the document...

This allowed us to see where our product currently was and where it should be. Depending on other teams’ product placement we would adjust accordingly. For instance, in the Low End market, other groups refrained from updating products each year, once this was identified we too, stopped advancing our products to save money. Since the entire market held their products constant sales did not decline.

Once the decision was made to transition our Performance and Size products to Low End and Traditional we had to decide on an approach. We could make gradual changes that were done by December each year and allowed us to update product specifications annually, or we could use the forecast and make the change in one adjustment. The latter would not allow us to revise the product for several years but it also would not allow the other teams to know what we were doing until the products finished their move. We decided that the surprise positioning was the better option as it wouldn’t allow the other competitors time to mimic our decision if it turned out to be successful.

When it comes to pricing we always strived to provide one of the lowest prices in the market. We decreased product prices by $0.50 on each product each year to appeal to consumers. Since providing a low cost product was one of our strategic goals we did not stray from decreasing prices. Looking back, perhaps we shouldn’t have been so loyal to our strategy when we were unable to turn a profit. While a strategy is important to stick to, being a profitable company is the ultimate goal.
3.  Discussion of how and why the strategy evolved over time.

Initially, we wanted to focus on being the market leader in Low End and Traditional products while still maintaining a presence in High End, Size and Performance. However, after the first year the products were not placed properly and we lost all competitiveness in High End, Size, and Performance. We made the decision as a team to transition the products to Low End and Traditional to reduce R&D costs while keeping a High End product. We wanted a presence in a sector outside of Low End and Traditional but the strongest presence in those two sectors.

Perhaps our biggest mistake was not evolving our strategy in other areas when we should have. Even when we were struggling to turn a profit we maintained investments in TQM, R&D, and marketing while still decreasing our prices to lead the market as a low cost provider. The strategy seemed like it would work, however, our investments outweighed profits and we kept falling deeper and deeper into debt. Looking back, our strategy should have evolved in one or all of those areas to give our company a shot a succeeding. Our company overcommitted on investments and with our product repositioning we didn’t have the sales to bail us out. As the company took on more and more debt the rates increased and the financial hole got deeper and more difficult to overcome.
4.  Discussion of...

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