BUSINESS SIMULATION

ASSIGNMENT
“COMPETITOR ANALYSIS”

R. SRI MOUNIKA
121823601048
MBA – A
Q)1. Give a short description of their current strategic position -- products,
segments, plants, capital structure, source of competitive advantage, etc.
Consider their product line from a “consumer reports” standpoint.

A) One Company is currently selling two products. The company is

producing and selling 2 products, both in the Low-Tech segment. While 1
(Low Tech product) was able to get a very small market share in the High
Tech, second was not. It has an overall cost leadership structured
management because its prices are around average, and it is producing
products in the Low-Tech segment. For this reason, the company is
supposed to exploit scale of production and minimize costs by
increasing automation to compete on a basis of price, which will be below
average. It is the lowest cost producer but is not offering the lowest-priced
products.
This situation is happening because the company is not spending enough in
awareness and accessibility, which is crucial for Low-cost strategy.
Another reason is also that the company is not designing products to meet
the best customer buying criteria for Low-Tech. There is high demand for
Low Tech and has not expanded capacity, which is leading the company
towards a direction different from Low- cost strategy. Furthermore, the
company is not investing in recruiting to meet demand and is not spending
enough on training hours to have the best quality employees. The financial
strategy of the company has nothing to do with that of a Low-cost strategy
company. In term of capital structure, from previous years to present, the
company operates, invests, and finances its activities by being issued
Emergency Loans. The company is also taking constantly large amount of
long- term debts instead of issuing stocks to raise money to cover human
resources and production expenses. The company is not selling enough to
cover expenses and has negative percentage of return on sales, which
resulted in negative numbers on retained earnings. All those issues may lead
the company towards a path of bankruptcy.

Q2.) Assess their current opportunities and threats. Given the segments they
have settled upon, how big could their sales volume get? What is the profit
potential? Can they maintain a competitive advantage?
A) Accessibility: each product has the lowest accessibility of 67% while
other companies are having 95%. This low accessibility means it is not every
customer that can easily interact with Erie’s products.
Awareness: product 1 has 51% and second has 70% of customer awareness.
Other companies are having 100% awareness in the same low-tech segment.
Based on this low percentage in awareness, it is not every customer
that knew about the products.
TQM: The Company is spending $0 in TQM. Erie is missing opportunities
to reduce the material, labour, and administrative costs, shorten the length of
time required for
R&D : and increase demand for the product.
Production: Inventory is very high for leading to holding costs. Contribution
margin is very low for Able meaning variable costs are high. Plant
utilization is 0% meaning that plants are not being used effectively.
Emergency loan: In all rounds the company is having emergency loans
leading to distortion of stock prices and high interest rates. The company
seems to be having liquidity crisis at all time.
Stock prices: The stock price is $1 per share while other companies have
$44.99 per share. This clearly indicates to stockholders that the company is
experiencing performance issues.
Growth rates: After the recession the industry growth rate has decreased
significantly, Digby needs to place attention on production to avoid
inventory holding costs.
Emergency loans : Emergency loan is a dilemma for Digby. Since the
beginning, the company keeps operating, investing, and financing with
emergency loans.
Plant utilization: has 0% plant utilization for Echo and 25% for Eat. The
company is paying depreciation and interest on those underused assets. The
company is not producing enough products to compete and therefore is
missing sales opportunities.
Performance and size:. After adjusting the MTBF of Eat, it will meet the
buying criteria for low-tech market and have more market shares in the
future. Automation for Eat product is already 4.0. The product is selling, and
the design is good for low tech.
Increasing automation will lead to low labour costs and high contribution
margin, hence higher profits.
 Opportunities : Customer awareness and accessibility As the accessibility
and awareness for both products are more than 50%, increasing spending on
promotion and sales may lead to higher demands and more sales.
 Company is having an opportunity to acquire the low segment
customers which is a good opportunity to achieve higher performance
in regard to sales . So company should allocate sales promotional
expenses which increases profits .
 Digby is having a good performance in market so it is an opportunity
to maintain good quality along with high customer base
 Size segment is very high for Digby which is a good indication of
more number of customers .
 Net cash from operations is high for Digby. company should work on
increasing the returns from operations .

Threats : Accessibility and Awareness. While other companies are having

awareness of 100%, and has 51%. Unless the company increases spending
on marketing, it will continue having negative impacts on sales and could
possibly never recover the losses.
 Digby has Over-produced than its capacity and it should work properly on
market analysis if not company will be flooded with over stocks which will
make company to be left with less or no cash in hand by the end of the year.
 Selling expenses are more in the Digby which will reduce the margins.
 Digby should try for increasing in quality of the product which makes the
company to stand in competition with other players in the market .
 Digby should work to reduce the separation &training cost which becomes a
threat for the company.
 Due to less performance it is creating problem for organization which is
making difficult to meet the needs of customers thereby reduces the number
of existing customers and difficult to acquire new customer.
 Next company should take care of traditional market segment which help
easy to get more customers.

Q3.) Predict their sales and profits for the ending year of the simulation.

A) To determine Erie prediction of sales and profits, the prediction for the
ending year in low tech industry has to be calculated. After the recession, the
low-tech industry growth is slowly increasing. If the low-tech growth rate
increases and reaches or exceeds the growth rate before the recession, then
the total sales for the industry can be estimated. After looking on the
previous sales in low tech from the Foundation Fast Track, Erie future
market share will slightly decrease. Assuming this is the case, then the sales
forecast for Erie can be estimated.
The profit for the company will be $395,000 at the end of the simulation.
The company has 3 rounds remaining. If Digby makes some wise decisions,
it may be able to increase a little bit the market share otherwise it may go
bankrupt.