Company A

Bryan Paul Orone 201605026

Introduction:

Stratsim Strategic marketing simulation was designed to make learning more pleasurable for
students while actually enabling them to learn the concepts better and faster. Some of the
aims of these simulation are explained below;

Enable us to think holistically: This simulation has helped was designed to help students
think holistically, in other words how management functions work together, i.e R&D,
finance, marketing, production to mention but a few.

Long termism: Business are in it for the long haul, and achieving a sustainable profit growth
was our main business objective.

Stay ahead of the perk: by giving us the opportunity to innovate, giving us industry news we
were able to use these external environment information, about competitors, costs of
production, GDP, sales forecast to innovate and stay ahead of the perk.

Being able to make tough decisions: The simulation had special decisions that would make
our strategies seem useless, being able to adjust under such circumstances which actually
happen in the real life scenarios is captured quite well in this simulation as well.

The following are the decisions we made on a period by period basis:

Decision 1 - Decided Corporate Strategy: Product differentiation and Niche market

From the start of the simulation we set to define our corporate strategy,
mission and goals. To become the market leaders in terms of revenue and
units sold in the target consumer segments, To become the most preferred
firm as consumer satisfaction measure and to have the highest dealer rating in
the industry.

- We also analyzed the consumer segments and chose the segments to

target.
We analyzed our product offerings i.e. Ace the truck, Alfa the family vehicle
and Alec the Economy class vehicles, to find out which of the vehicles we
would have to continue producing and those we would have to let go. Ace and
Alfa were a good fit for our target segments though would require upgrading,
in order to meet or exceed expectations of the high income consumer
segments especially.
The size of the targeted consumer segments i.e. high income, singles and
enterprisers were quite small as a single segment each but would yield
substantial benefits if combined. These consumer segments put together
represented 42.2% of total potential sales.

It was easier for us to target these segments concurrently because they had
somewhat similar needs and this meant that technological developments in
ISSQ features would be focused on the hot buttons of these segments and
they were similar, i.e. performance and styling were hot buttons for the 3T
microsegment, high income consumer segment and Enterprisers.

One mutual characteristic that these segments had that was of value to us was
that they would spend large amounts of their disposable income on vehicles
that is for the singles consumer segment, while the high income and
enterprisers were willing to pay a premium price for extra features and looked
at their vehicle as a symbol of status. Armed with such information we set out
to understand these segments better so we performed a study using the
market research tools available on the 3s microsegment which proved that the
top selling units in this microsegment were a poor fit.

This was valuable information which prompted us to develop a sports car in

order to meet the needs of this microsegment. We did not leave it at that, we
went on to perform concept tests in order to find out how many of the
targeted microsegments would actually purchase our vehicle, we purchased a
total of 10 studies which enabled us to develop the right vehicle for the right
segment, these studies were conducted in 2 micro-segments i.e. 3s and 3t and
the results revealed that more than 89% in the 3s microsegment were willing
to buy the sports car at $31,000.
The concept tests enabled us to adjust the product features to fit the segment
perfectly and meet their expectations, however Asporto would not be ready
until after 3 periods.
We however realized that we had limited resources and yet the sources of
finances available were very costly, so decisions on how we would spend the
limited resources available to us would be very crucial at this point.

- So we Selected Target features that would satisfy all of the targeted

segments.
What this meant for us was that we would invest the limited resources in
improving technological capacity in areas that were hot buttons for the
targeted consumer micro-segments: Single(3t), High income(4s), and
Enterprises(5u,5s,5t)
 - Produced A Sport car with 90% likely to buy as seen the from concept test
results.
Since we want to position our business as hi-end for upper class consumer
segment, and we need to find new target market which is high income and
single. So we produce highest quality sport car with premium price which
going to give us highest margin per unit (55.6 %).

- Major upgraded our Truck in line with our differentiation strategy

In order to give us a competitive advantage in superior product features and
shifted our marketing effort to focus on the 3T microsegment so as to increase
awareness of our truck.

- Set Corporate advertising theme

Our corporate marketing was focused on social media and direct selling
through brochures emphasizing the hot buttons that would appeal to this
particular segment i.e. Performance

- Issued stock to earn money instead of took debt

Since we need more money to operate business but instead of took more debt
with 8.5% interest, we issued more stock to have more capital.
Decision 2 - Minor upgraded our Family class vehicle Alfa and channeled marketing
efforts towards the High income segment with our eyes set on the 4f
microsegment.
In order for us to get a premium price from our offerings, we targeted this
particular and modified our vehicle to meet the specifications that would
satisfy this segment, so we upgraded the vehicle and charged an even higher
price to this less price sensitive segment, we continued upgrading this vehicles
ISSQs every period, and reflected the improvements in a higher price.
- Constructed new development center
In order for us to continue offering the kind of value that these segments
expect of us, we had no choice but to embark on a vigorous research and
development strategy, therefore we built the 3rd development center.
- Stopped producing and distributing Economy class vehicle Alec:
After we had sold all existing Economy class vehicles we stopped its
production and therefore marketing efforts, this was a bold move that we
agreed upon at the beginning of the simulation and implemented it in season
two, the wise move would have been to produce it until Asporto was launched
but this would cause confusion amongst customers, and we would incur
marketing expenses for the same. This strategy was also beneficial for us
because it gave the impression to competitors that this segment was not well
 catered for and would require them to deploy resources to this segment, this
worked well for us. This was a major step in implementing our differentiation
strategy and allowed us the time and resources to focus on meeting and
exceeding our targeted segments needs.
- Purchased one year CD to earn interest
After all this we had some cash left over and needed to all the resources we
would get our hands on for our future ambitious developments ($5,275 million
and expected to earn approximately $3,000 more) so we decided to purchase
one year certificate of deposit for 2,000 to earn 3.0% interest which was a risk
free investment.
- Paid back 40% of short-term debt
We also deposited on our revolving fund to the tune of 40%, this was a move
that would increase our bond rating in order to acquire less expensive capital,
and free the company from those high interest rates which were at 7.5%.This
strategy paid off as we were able to acquire capital at 4.5% in the next period.
Decision 3 - Launched Sport cars with high advertising budget
We launched Asporto our sport car with $80 million dollar in advertising
budget with only $10 million in promotion. From our earlier studies of the 3s
and 4s and 5s microsegments we got to learn the characteristics and
consumer behavior of these segments, we realized that they were less price
sensitive and therefore we did not have a good reason to have a high
promotion budget, we deployed more resources into advertising to create
awareness of the new sports car.
- Added Social media budget for corporate marketing
In efforts to enhance our brand equity and corporate image we embarked on
corporate advertising through social media, however it is worth noting that
we did not stop at that we also increased expenditure on product advertising
while setting an even higher advertising budget for Asporto.
- Increased number of dealers and training budget
We had ambitious future plan to produce to more vehicles one SUV and
Luxury class vehicle this required us to increase the number of dealers and
also ensure that the dealers would give the consumers a pleasant buying
experience. We also expected Asporto to increase show room traffic and it
was necessary for us to train our dealers to handle the same. This was also an
effort to increase our firm preference amongst our customers in line with our
corporate strategy.- Started paying dividend to increase stock price
We earned a huge premium from Asporto which made the company more
financially stable in cash and also profit. So we issued dividends to our
shareholders.
- Keep minor upgrading Truck and Family cars and also charge premium
price. We never neglected our old units, Ace had become a cash cow and
 therefore we upgraded it, alongside Alfa and increased the prices to reflect
the improvements.

- Increase manufacturing capacity for 200,000.

We also increased capacity by the said units with an aim of avoiding over
capacity costs in the future and so as to be able to produce a satisfactory
number of vehicles to our customers. This was also in line with our
corporate strategy of being Market share unit sales leader.
Decision 4 - Produced Utility cars to serve customers in new class
After our successful launch of Asporto, and the high profits from the same
same We targeted our efforts at closing the gaps in our segments, we realized
from research that the 5U was quite huge but the preferred vehicle class for
this segment was Utility but it was not part of the product offerings of any of
the companies, the market leader in this segment was Ace our truck which
was poor fit for this segment, followed by Dusty which was an even poorer fit,
armed with this information we embarked on developing a concept Utility
class vehicle Audi, and the test showed that it was well received by the
targeted microsegment, we therefore moved our concept to the development
stage.
- Paid back all short-term debt
We had become quite liquid but still had very high costs of interest, so we paid
off all of our debt but it would set us back, so we decided to pay it off and get
less costly finance from Bonds at a rate which was 3% cheaper.
- Issue bond at AA bond rating
We issued bond certificates of 6billion dollars at 4.5% which was twice the
amount we needed to pay off the debt and we kept 3 billion dollars for future
development projects, this we believe was our winning strategy because it
afforded us less expensive sources of capital, and helped us to reduce our
interest payments and yet we had more finances.
- Increased amount of dividend paid
We gained higher profits each year so we increase dividend to increase our
stock price as well. This strategy worked for us every time we used it, so we
continued doubling our Dividends.

Decision 5 - Product Luxury cars to capture all high-end segments

We were doing amazingly well in these target segments but needed to have
strong footing, so we did research and decided to produce a luxury class
vehicle Aston martin, to capture all high-end micro segments which are Single,
High income, and Enterprise. So the Luxury car was our final product offering
 to emphasize our premium brand image as well as meet the needs of our
target segments specifically 4L.
- Constructed new development center
With extra resources at our disposal we set out to construct another
development center, which would be our fourth and final one, one
development center was tied up for the next 3 seasons, leaving us with only
two and yet we needed to continuously develop all our unit class vehicles, this
new development center would enable us to have concurrent developments
of vehicles.
- Increased number of dealers in South and training budget
We are going launch new Utility class vehicle next year we need more dealers
and the human resource to handle the same, so we increased the number of
dealers in the south which trailing in coverage, and deployed resources for
training
- Purchased one year CD to earn interest.

- Keep minor upgrading Truck and Family cars and also charge premium price
- Increase manufacturing capacity by 200,000.

- Increased amount of dividend paid

Decision 6 - Launched Utility cars with high advertising budget
The same way we launched the sports car, i.e. with a bang we launched Audi.
With an advertising budget of 100 million dollars, to get awareness of the new
product, it had become our culture to do so.
- Increased number of dealers in South and training budget
We are going to launch new Luxury class vehicle next year we need more
dealers and the right sales people, we had it at the back of our minds that
every point of contact with our customers is representative of the brand, and
therefore to ensure superior service measured by firm preference this was a
more than necessary move.
-We continued minor upgrading Truck and Family cars and also increased the
prices after concept testing the vehicles and increased the prices to reflect
the same.
- Increased amount of dividend paid to 500 million dollars.

- Increase manufacturing capacity to 300,000 as we were preparing to launch

our Aston martin and as an effort to become the unit sales market leaders,
we stood at 2nd position.
Decision 7 - Launched Luxury cars with high advertising budget
As same reason as when we were launched sport and utility car, we launched
our Aston Martin- luxury class vehicle with big amount in advertising budget at
$100 to get awareness and introduction of new product.

It is worth noting that Team E also launched the same vehicle class, Luxury and
we were watching them carefully, we were very careful in our pricing because
we knew that even if we were offering superior ISSQ attributes and customer
service as seen from firm preference there was a limit to how much even the
high income segment would pay. To cut the story short the Luxury car of firm E
was charged 20,000 dollars more than ours with less ISSQ features, and only
sold a miserable 4,000 units.
- Increase overall firm ISSQ
Some of the attributes of majority of our units were upgraded to the firm
maximum and therefore this required us increase firm overall attributes in
order to continue upgrading vehicle units in the following periods.
- Charge highly for Truck due to less Truck competitors in the market (from
regulation of safety) to gain higher margin per unit
Due to the regulation of safety, the vehicles that had safety levels lower than 4
could not be sold in the market, so that meant we had less competitors. All of
the firms were affected by this except for firm D with Dusty, so we took the
risk and increased our MSRP by $5000 and limited the number of vehicles
produced, we made this decision with the help of the law of demand and
supply, this strategy paid off, our sales increased and we captured market
share in terms of revenue, we were also market unit market leaders in all the
segments that preferred the Truck vehicle class as their unit except for 1T
where Dusty took the lead. This was because the 1T microsegment was price
sensitive and Dusty charged a lower price.
- Decrease number of Sport cars manufacturing since product life cycle of
Sport cars in the Maturity stage
We found out that now our sport car sold less in last year and analysis show
that it already in maturity stage so we reduce the number of production
because we also have inventories left like never before.
The major issue we faced with Asporto was because we had not upgraded it
from the time it was launched, e concentrated on upgrading the other units
and developing new concepts because we though that being the only Sports
car in the segment we would continue to sell it as it was, we were wrong this
vehicle needed to be upgraded as Dusty and Ace were very high in ISSQ
attributes and enjoyed secondary preference in the 4s and 3s microsegments.
- We therefore Minor upgraded the Truck, Family, and Sport car vehicle
classes.
 - Increased manufacturing capacity for 300,000.

- Increased amount of dividend paid

Decision 8 - Upgrade all vehicles except sport car but charge more price only for Family,
Utility, and Luxury class vehicles.

The reason we did not increase price for truck was because. We were short on
one target that we set out to achieve. That is unit market leadership. So we
decided not to increase prices but make upgrade to the units and therefore
capture a bigger unit sales market share. Which we did, we number one in
both Unit sales and sales revenue share.

- Increased amount of dividend paid

We paid a dividend of 1Bn dollars and this was double the amount paid in
period 7. This is what we attribute our high share price to.

Lessons from the simulation.

In addition to the learning objectives in the introduction section, we are proud to mention
that we also learnt the following:

We learnt how important it is for marketing managers to put into consideration the other
functions of the organization when making marketing strategy decisions. Poor financing
decisions were the Achilles heals of most of our competitors. We also had to make
manufacturing decisions as well.

Research and development were valuable tools, concept testing and focus groups helped us
to determine the prices and ISSQ attributes that would meet expectations of our customers.

The importance of focusing one of the two strategies i.e. differentiation or cost leadership
was brought to light during the simulation., the firms like E who did not have a proper
strategy kept jumping from segment to segment and it cost them, some firms like firm C
tried to capture share in a high value consumer segment yet they started by targeting value
seekers this causes confusion amongst customers.

The biggest segments tend to have many competitors as everyone seeks to take a bite off
the share of the pie but this is not necessarily the best segment to target especially if your
resources are limited. Targeting smaller consumer segments and further targeting
microsegment was a more viable option.

Product Based on what consumers are likely to pay (focus groups in concept and
market test)
Price Charging a premium price after putting dealer discounts into consideration
Place We are spending quite a lot on training and support of distributors
Promotion Advertising themes are target to the right audience, highest expenditure in
the industry from period
Corporate advertising is also top on our agenda for every season.