European Automotive Industry Simulation The WritePass Journal

European Automotive Industry Simulation Part 1 Initial strategic position and intentions European Automotive Industry Simulation , p.88). The intense rivalry drives down the margins especially for the small companies. Initial resource audits The initial investment value for ABD is  £ 16, 310. 34 million and the total capital employed at the start of the simulation stood at  £ 30, 054.30 million. Intended Strategic Direction for the next 5 simulated years (decision periods) Mission Statement The mission of ABD is to be the leading provider of sheer driving pleasure and safety to Europe and beyond. The ABD brand combines dynamic performance and superb design to the customers at relatively affordable prices. Overall Target Markets and Strategy ABD motors targets mostly the younger drivers and strives to give then fun, safety, modern technology and design. The company relies heavily on advertisement as a marketing method although it also gives the products a chance to market themselves through quality and efficiency. Financial and Strategic Objectives In order for the ABD motors to establish and maintain a competitive edge, it strives to localize its operations through increased local sourcing in order to penetrate the European market. In terms of pricing the company aims at pricing its products competitively in order to attract more customers.    Assignment Part 2 Strategy development and progress against your plan over the 5  to 6 simulated years.    Your strategic analysis for each trading period – such as changes in the macro environment (PESTEL) and competitive environment (including any changes to the industries 5 forces and critical success factors as well as to your company’s internal position).   Ã‚   In the round 5 results the company produced 1643 units of ABD LXY and then sold 3939 in the same period. This implies that all the units produced were sold together with some that remained from the previous round. The performance of this period on the model is an indication that the company failed to produce enough units of ABD LXY model as evidenced by the zero units in stock. This could have been as a result of the 2296 units that remained from the previous period which prompted the company to produce less of the same model. Although this decision was partly right, the company should have laid plans for immediate production of more units when they realized that the sales went up compared to the last trading period. Having zero units in stock is not healthy for the company because the inconsistencies in production cause unnecessary inconveniences to the customers. Furthermore, the market share for the model is 0.57% which is relatively low. For the ABD 400, the sales stood at 65714, and 29610 is still in stock. The market share stands at 1.26% which is not bad.   ABD A5 all the units produced were sold just like in the previous period as evidenced by the zero units in stock. The market share stands at 0.14% but the company can still take it higher given that it may not be producing enough units for the market because of the zero units in stock. Lambooo model has many units in stock but the 1.51% market share indicates that the units were produced in excess during the previous period.   For the Skittles their case is somewhat similar to that of ABD A5 although the market share is higher than it by a margin of 0.01%. b. How your short term plans and strategic objectives/tactics have been adjusted in terms of the above changes to the external environment and also your company’s changing internal position   Operations strategies (capacity, production inventory changes) The operational strategies of ABD are in some ways out of touch with the reality on the ground as evidenced by the zero units in stock for some models and excess units of other models. This is not good for business as the excess units of some models are tying up funds for the other models, the company should therefore base its production depending on how first the merchandise is moving in order to improve the overall performance in terms of consistency and efficiency. Marketing strategy (4P’s) In terms of the marketing strategy, the company is producing the right products as evidenced by the market share. The automobile industry has a very strong competition especially from the well established brands like Toyota, BMW, Honda and General Motors. However, the company should consider designing new products in order to improve its financial performance. In terms of pricing, the products are well priced because there is no evidence suggesting that the price of the models is affecting sales. In fact the expensive models like ABD LXY and Lambooo performed relatively well. The ABD LXY sold all the units whereas Lambooo was only second to ABD 400 in terms of total sales. In terms of promotion the company still needs to do a lot of marketing especially for model ABD 400 which still has a lot of units in stock. The same should also be done for Lamboo and all the other models in order to improve their market share. On the last item of marketing strategy which is place, the company should try to establish itself out of Europe by trying other markets like the other companies. A global approach will give it a wide customer base and in process enable it to benefit from economies of scale. a. Financial management The company does not have enough money for the chosen projects and still needs better financial and strategic plans for success in the short run. The balance sheet indicates that the company has negative net current assets, negative net total assets less current liabilities and a huge bank overdraft.   The company should therefore produce more of the well performing brands and reduce the less performing ones to raise the additional funds for reinvestment. b.  Human Resources The team has an adequate workforce that is competent and efficient. The workforce only had 3 days of strike which implies that they are relatively happy with the terms of the employment and working conditions at the company. The productivity index of 0.73 is also healthy meaning that the human resource department is working efficiently. c. Your changing corporate portfolio of products (SBU’s) Generally, the company made some strategic decisions aimed at improving the performance from the previous period. These decisions were fruitful for some models like the ABD LXY but some failed short of expectations like the Lambooo. In the case of the Lambooo the competitors managed to neutralize the plans of the company as the brand failed to perform as expected.   Assignment Part 3 Final Report – A Reflective Portfolio The team ended with a closing balance of  £ -47009.05 million which is not good for the general health of the company. This poor performance is as a result of the big loss of  £ -30,554.30 million suffered by the company. The profit and loss account reveals a problem with the pricing of the final products, the sales stood at  £ 1694.44 million and the cost of sales is  £ 1386.34 million. In this case the gross profit is  £ 308.01 million which is not even enough to cover for the operational expenses and still generate revenue for the company. The implication here is that the price component of the marketing mix element has a problem. The cost of production is very high and this is weighing down heavily on the company and if the trend persists then this could even force the company out of business in the long run. The company can solve this problem by pursuing two approaches either jointly or partly. The first option is to reduce the cost of production through looking for different suppliers and adoption of better technology to reduce operational costs. This will increase the profit margin for the company. The other option is to raise the price of the final company products. However, because raising the price of the products may backfire as it may turn off some customers; it is advisable for the team to first consider lowering the cost of production. 3.1 Description of your company’s successes and failures and your learning’s in implementing your strategy against your set mission/vision and plans as given in part one of your report. Generally the products of the company have been accepted by the consumers as evidenced by the market share of the different models. The company has managed to live to its mission statement, with the only problem now being revenue generation. This is the reason why the management now needs to come forward with better financial and strategic plans that will steer the company forward and start generating huge profits like the other companies in the industry. The first possible method is to reduce the cost of production through using better technology or getting better suppliers or even both if possible. 3.2 Include in your final report your reflections on this learning exercise This learning exercise has made me realize the essence of planning and understanding the nature of the industry before venturing into business. I have also learned that at times things do not work as planned and that it is always critical to review decisions in order to correct mistakes and also learn from the techniques used by the competitors as methods of succeeding in the competitive business environment.   3.3 company’s â€Å"end game† position (trading period 5), strategic recommendations for the next five years for the Executive company. The strategic recommendation for the company in the next five years is that it should deploy ways of lowering the cost of production. 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