DigiCam effectively participated in a virtual business simulation game focused on marketing, business strategy, and competing with several digital camera companies. Students represented the corporate leaders of the each company. In DigiCams case, Nene Akintan, Khalid Golden, and Jessica Maldonado, served as the corporate managers. By applying knowledge obtained from conferences and the Glo-Bus textbook by Thompson, the team members set out to make appropriate decisions in an effort to gain a competitive edge in the global digital camera market.
DigiCam faced many challenges throughout the simulation and sought to overcome the challenges through application of several strategies and resource decisions. The purpose of this paper is to provide information on the competitive strategies, offensive and/or defensive strategies, strategic approaches, resource decisions, value chain activities, spending efforts, and the internal decision-making operations used by DigiCam during the course of the simulation.
Competitive Strategies There are five competitive strategies that companies employ to enable a competitive advantage over rival firms. According to Thompson, A companys competitive strategy deals exclusively with the specifics of managements game plan for competing successfully”how it intends to please customers, offensive and defensive moves to counter maneuvers of rivals, responses to shifting market conditions, and initiatives to strengthen the companys market position and achieve a particular kind of competitive advantage (2010, p.88). These strategies include: * A low cost provider strategy
* A broad differentiation strategy * A focused strategy based on low cost * A focused strategy based on differentiation * A best-cost provider strategy The low cost provider strategy aims at achieving lower costs than rivals in an attempt to use lower costs as an advantage to attract a broad base of buyers centered upon low-cost products. With the broad differentiation strategy, organizations pursue ways in which to differentiate the companys product from that of rival firms in order to appeal to a broad spectrum of buyers. The focused strategy based on low cost targets a narrow concentration of buyers and outduel rivals with lower costs, thereby earning buyer favor. A focused strategy based on differentiation also focuses on a narrow buyer segment; however the company markets and produces products designed for specific tastes and requirements of niche members better than rival companies. Lastly, the best-cost provider strategy is based upon achieving a competitive advantage over rivals by developing the capability to incorporate high quality products at significantly lower costs than rivals.
Of the five competitive strategies noted above, DigiCam focused on the strategy based upon broad differentiation. After initially producing a higher number of both entry-level and multi-featured components, DigiCam changed strategy from practice years and decided to reduce the number of models in an effort to increase the level of quality products with added features to attract buyers and gain their trust and allegiance. Additionally, DigiCam sought to increase sales in all markets overall. The significant challenge to our organization was to develop a product with sufficient quality, while at the same time, increasing and retaining demand for DigiCam products without drastically lowering the product cost.
DigiCam made every attempt to increase marketing, length of warranties, and advertising; however, the company was unable to gain a significant competitive edge in the market after each Glo-Bus Year. Overall, the differentiation strategy didnt work for DigiCam, while each of the five competitors basically buried us with their own competitive pricing. After differentiation proved futile, DigiCam also attempted a low-cost strategy. A low cost strategy over rivals has enormous competitive power, sometimes enabling a company to achieve faster rates of growth (Thompson, 2010, p.90). To do so, DigCam sought to attract a significant number of buyers by having lower prices in all markets, with the exception of Latin America where the company controlled the dominant share of the market. Although DigiCam met buyers expectations and increased profit and revenue, the company still failed to overcome the strategic moves conducted by the rival digital camera companies.
Offensive and Defensive Strategies Offensive strategies enable organizations to go the attack in order to take advantage of the weaknesses of competitors. DigiCam made efforts to employ an offensive strategy focused on increasing the companys net revenue and profits. Since the company was already strong in Latin America and doing well in North America, DigiCam took aim to increase sales in those two areas requiring market growth: Europe-Africa and Asia-Pacific. DigiCam employed offensive efforts to increase sales by increasing the length of promotions in conjunction with an increase in advertising in these regions. Thompson notes this as one of the options for an offensive strategy, deliberately attacking those market segments where a key rival makes big profits (2010, p.109).
Another offensive strategy used was offering an equally good or better product at a lower price. With our low cost strategy, DigiCam sought to go on the offense by offering both our entry-level and multi-featured cameras at lower prices than rivals. However, our competitors routinely responded by shifting prices year-after-year in response to DigiCams attempts to gain a market share in targeted regions.
In regards to defensive strategies, the company probably faltered by not protecting regions areas such as Latin and North America from offensive maneuvers by rival companies. Basically in these regions, DigiCam stood pat and only employed minimum market and promotion strategies. In all competitive markets, all firms are subject to offensive challenges from rivals (Thompson, 2010, p.111). This is precisely why DigiCam should have taken up more of a defensive posture against rival firms.
Strategic Approaches DigiCam sought the middle ground and pursued the Think Global, Act Local strategy. The Think Global, Act Local approach entails utilizing the same basic competitive theme (low-cost, differentiation, best-cost, or focused) in each country but allowing local managers the latitude to (1) incorporate minor country-specific variations in product attributes to better satisfy local buyers, and (2) make whatever adjustments in its production, distribution, and marketing strategies that are needed to be responsive to local market conditions and compete successfully against local rivals (Thompson, 2010, p.138). This strategic approach was used to allow variation of our products while using the same brand name. The Think Global, Act Local strategy enabled the company to tend to the needs and desires of local buyers in the regions so as to increase sales and gain buyer trusts.
By using this middle of the road strategy, DigiCam sought to decrease risks by spreading the business risk across the global market using variations of products. This strategy opened the door for opportunities for DigiCam to increase its global presence, and thus, lead to a competitive edge in the market. Shift Resources
To get out the bottom of the market, DigiCam attempted to shift resources. From years 8 to 9, DigiCam reduced the warranty period in North America from 1 year to 6 months, which led to a slight increase in market share from 17.6% (Year 8, Qtr 4) to a high of 18.3% in Year 9. DigiCam stood pat in Year 10 however, which led to a low of 16.3% in Quarter 4. In Asia-Pacific we stuck with a 90-day warranty period, producing a high of only 5.7 percent market share by Year 10. In DigiCams strong region, Latin America, a high market share was maintained until Year 10, which is indicative of rival companies going on the offense, thus leading to a reduction.
In Latin America, the company probably should have adjusted the warranty period, rather than maintain a 1 year warranty in both Year 9 and Year 10. Additionally, DigiCam mistakenly shifted resources by reducing advertising ($000/qtr) in Latin America from 150 in Year 9 to 100 in all quarters in Year 10. In addition to shifting resources in regards to warranty periods, DigiCam also provided adjustments to the length of promotion periods. In all regions, DigiCam maintained the number of promotions. However, for Multi-Featured cameras in Asia-Pacific and Europe-Africa, the company adjusted the promotions from 1 week to 0 weeks between Years 8 and 9, and then increased the promotion to 2 weeks in Year 10. No promotional changes were made in Latin America and North America, which may have allowed entry by competitors. Value Chain Activities
In order to help ensure continuous process improvement, the corporate managers conducted meetings twice weekly to go over strategy and value chain activities. DigiCam made every effort to ensure consistency year after year in the management of value chain activities. DigiCam ensured employees were well-trained and that funds spent on new product research and development, engineering, and design was maximized in all markets.
In the performance of value chain activities, DigiCam ensured that each operating facility functioned at full capacity, meeting supply and demand, so as to ensure success. According to Thompson, Success in employing a differentiation strategy comes from deliberate efforts to perform value chain activities in ways that create desirable differentiating attributes, thereby enhancing the value delivered to customers and better differentiating the companys product/service offering from the offerings of rivals (2010, p.97). Methods in which these activities were accomplished was through continuous process improvement, emphasizing human resource management activities to improve the knowledge, skills, and abilities of employees, and product innovation such as increasing the number of components on multi-feature cameras. Spending Efforts
Balancing the shareholders expectations of maximum return against other priorities is one of the fundamental problems confronting corporate management. The shareholder must receive a good return but the legitimate concerns of other constituencies (customers, employees, communities, suppliers and society at large) also must have the appropriate attention (Thompson, 2010, p.185). DigiCams social responsibility and corporate citizenship effort did not get the attention deserving of recognition. In hind sight, the company should have balanced the expectations of shareholders with the needs of the workers.
Company spending was limited on charitable contributions, green initiatives, and energy efficient programs as so much focus was geared towards saving costs. However, although the investment into the programs would cost the company during purchase and initiation, proper foresight and vision would have allowed corporate managers to understand future savings to the company. DigiCam did however make efforts to improve employee working conditions by implementation and continuance of company cafeteria and on-site day care, in addition to the installation of proper safety features such as ventilation, lighting, and top-notch equipment. Spending on these efforts is justified to shareholders because such features lead to more productive workers, quality products, and company image rating.
Internal Decision-Making Operations With corporate managers having equal control of the decision-making process, DigiCam primarily functioned on a basic of consensus. From the first meeting onwards, each group member was allowed to suggest decisions on strategic approach for each year. The final decision made was based upon total agreement and consensus by the team. To support the decision-making process, the team collaborated at least twice weekly to review current and prior year reports in an effort to make timely and efficient decisions in support of the business strategy.
The consensus approach significantly reduced conflict and allowed maximum participation by each team member. This was a clear advantage of the consensus decision-making approach. One disadvantage may have been when one particular corporate manager suggested the right approach; however, the decision may not have been used due to majority overrule. To allow for consensus, members must be able to accommodate, collaborate, and compromise so as to make proper decisions for the benefit of the company. Conclusion
Overall, this effort was most challenging and required superb strategic skills and decision-making. Although the DigiCam company finished last year after year, the knowledge obtained by this simulation provided for a valuable experience in not only business strategy, but also team work.