Abstract
Business simulation is simulation used for business training or analysis. It can be scenario-based or numeric-based. Most business simulations are used for business acumen training and development. Learning objectives include: strategic thinking, financial analysis, market analysis, operations, teamwork and leadership (WIKIPEDIA).
The authors participated in a simulation. The results and mistakes are discussed in this presentation. The authors also discuss the theoretical foundations. This book contains the presentations illustrated and supplemented by explanatory texts.
Content
1. Team Organisation
2. Environmental and internal strategic analysis
3. Strategic brief
4. Strategy review
5. Internal control system
6. Financial analysis
7. Conclusion
Keyword
Business simulation, reflection report, automotive industry, Team Organisation, Environmental and internal strategic analysis, strategic brief, strategy review, internal control system, financial analysis, conclusion, leadership, teamwork, storming, norming, forming, performing, PESTEL, Porter diamond, Porters five forces, start up, market penetration, profitability, new products, relaunch, R&D, KPI, Product portfolio and target markets, SOWT, marketing mix, 4 P, Product, Price, Promotion, Place, Plan, Results, Lessons learned, miscommunication, communication process, COSO, Internal control framework, 5 year trend, profitability analysis, efficiency analysis, investment analysis,
Table of Contents
1. Team Organisation
2. Environmental and internal strategic analysis
3. Strategic brief
4. Strategy review
5. Internal control system
6. Financial analysis
7. Conclusion
Objectives and Topics
The primary objective of this report is to reflect on the authors' participation in a business simulation, identifying key strategic decisions, operational failures, and the resulting financial outcomes to provide a comprehensive analysis of business acumen.
- Strategic analysis of the automotive market using PESTEL and Porter's Five Forces models.
- Evaluation of internal organizational structure and leadership effectiveness during the simulation.
- Deep dive into financial performance metrics, including profitability, efficiency, and investment analysis.
- Critical review of internal control systems and the impact of communication processes on operational success.
- Synthesis of lessons learned to prevent future mismanagement and optimize business decision-making.
Excerpt from the Book
Power of Buyers: The automotive industry is supported by the demand of the consumer. Cars are standardized and switching costs for consumers from one to another company are low; therefore the powerful fragmented consumer structure accounts for a significant portion of the automotive industry’s total output. This and other changing behaviours such as getting more price-sensitive enquiries for small and environmentally friendly cars puts the industry under pressure. Marketing efforts can be directed to those consumers who still possess strong buying power. Incentives will be used to attract those consumers whose buying power has been negatively impacted by recession.
Power of Suppliers: The number of suppliers operating in an industry affects their individual bargaining power. In the car manufacturing industry, the number is staggeringly high. Firms are able to source their parts from a range of different suppliers - often just concentrating on the automotive industry - operating in a fiercely competitive environment. Changing suppliers is convenient and inexpensive, which further increases rivalry. Elight cars will take advantage of the present glut of Suppliers capacity. Pricing pressure can be brought to bare on Suppliers to ensure the lowest possible cost of goods.
Intensity of Rivalry: The automotive industry is split among a few closely balanced players, which indicates an oligopoly market structure. The competition is high as all players are well established and grounded in particular characteristics. To develop elight cars business and raise market share, they need to attack the competition. Marketing will be utilized to build brand image and to increase market share.
Summary of Chapters
1. Team Organisation: Discusses the group dynamics and the application of experiential learning theory during the simulation process.
2. Environmental and internal strategic analysis: Provides an in-depth PESTEL and Porter's Five Forces analysis of the automotive industry to define the company's strategic approach.
3. Strategic brief: Outlines the vision, mission, and development phases planned for the company over a five-year horizon.
4. Strategy review: Details the year-by-year plan, actual results, and critical lessons learned regarding pricing, R&D, and production management.
5. Internal control system: Analyzes the failure of internal communication and the necessity of implementing the COSO framework to safeguard business assets.
6. Financial analysis: Examines the company's financial performance, including profitability, efficiency, and investment metrics, revealing the causes behind the accumulated losses.
7. Conclusion: Summarizes the management failures and critical strategic errors that doomed the company to insolvency despite early relative success.
Keywords
Business simulation, reflection report, automotive industry, Team Organisation, Environmental and internal strategic analysis, strategic brief, strategy review, internal control system, financial analysis, conclusion, leadership, PESTEL, Porters five forces, SOWT, COSO, profitability analysis.
Frequently Asked Questions
What is the core focus of this report?
This report focuses on a reflective analysis of a business simulation performed by a student team, exploring the strategic, operational, and financial challenges they faced in the automotive market.
What primary methodologies are applied?
The authors utilize several management frameworks, including PESTEL for environment analysis, Porter's Five Forces for industry competition, SWOT analysis for internal assessment, and the COSO framework for internal control.
What was the main goal of the company "elight cars"?
The company aimed to become the market leader in the medium-sized car segment by focusing on innovative, environmentally friendly, and affordable vehicles.
What were the main reasons for the financial failure?
The failure was primarily caused by overambitious production, poor communication between team members leading to massive overproduction, and an early, high-cost investment in automation that negatively impacted cash flow.
What is discussed in the "Strategy Review" section?
This section provides a year-by-year breakdown of the team's planned versus actual decisions, specifically focusing on price, R&D, workforce management, and the lessons learned from each phase of the simulation.
Which key performance indicators (KPIs) were analyzed?
The report examines market share, sales volume, EBIT margins, share price, and various financial ratios like ROE, ROCE, and inventory turnover.
How did "elight cars" handle its supplier relations?
Due to the high number of suppliers and a market glut, the company leveraged its position to apply pricing pressure on suppliers to minimize the cost of goods.
What was the most significant communication mistake identified?
A fatal miscalculation occurred in year 3, where a misunderstanding on a decision form regarding automation investment resulted in purchasing twice the required number of machines, leading to extreme financial loss.
How did the company attempt to solve overproduction?
Initially, they ignored market signals, but eventually, they were forced to implement massive workforce reductions (cutting from 3,999 to 1,000 employees) and slash prices, which significantly harmed profit margins.
What is the final conclusion regarding the team's performance?
The authors conclude that dysfunctional communication and flawed strategic decisions from the beginning—such as over-leveraging and failing to match production to demand—doomed the company to significant losses.
- Quote paper
- Markus Baum (Author), Jörg Dickerboom (Author), Marco Hackstein (Author), Marcel Mehling (Author), 2010, Business Simulation, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/194604
