Fall
Simulation 1 Summary
Tingting zeng
[Type the company address]
16
The goal of the simulation is to increase the accumulated profits as much as possible.
There are two ways to increase accumulated profits, one is through increase market
share, and the other is to increase price/vehicle.
I have a steep learning curve through the process, my first trial of simulation ended
up with negative cumulative profits. However, I gradually improved my scored to
60+ million. Here are some of the strategies that I have applied through the
simulation.
Firstly, to increase market share, I have tried several times to understand the
seasonality of the rental car business, along with history data, I get a basic
understanding of the demand of each months, such as from Dec to June, when there
are more holidays, weekend travel is in high demand while from August to Oct,
when there are less holidays, weekend travel is lower demand. In the meanwhile,
there is more business travelling (weekday rentals) at the end of the year than in
the beginning of the year. Therefore, on the one hand, I will increase/decrease the
capacity (fleet size) accordingly to compete with competitors for bigger market
share and minimized unfilled orders that incur inventory cost. On the other, I have
increased the price of the rental cars when there is higher demand in the market
during the peak season and lower the price while the need decreased.
Secondly, I applied break-even calculator to analysis the price range that I can work
on within my capacity. And tried a lot of simulations just to look closely on how both
the competitor and customers will react to my price decisions. The higher the price
sensitivity, the more careful I will adjust my price so as to protect the market share
and increase profits at a reasonable price. In the first few rounds, I tried to undercut
competitor’s price, which turned out affected my profits in a negative way, therefore
I decided to raise my price much higher than competitor’s and control my inventory
accordingly to maximize my profits.
My conclusion is that there is more than one way to increase profits. No matter what
strategy I have adopted, there will be trade-offs and risks. I learned that best way to
win is to have an anticipatory mindset and response faster to customer need and
competitors’ change. It is really a good learning experience by observing how
different price strategies affects business profits in a different way.
n the simulation with three months of historical data that allows them to begin analyzing
demand for car rentals and available capacity at Universal Rental Car. Each city serves a
different mix of business and leisure travelers and the particular price sensitivities of
these segments cause demand variations in each city and between weekdays and
weekends. Students must consider both historical data and market demand forecasts to
understand price elasticity for the two market segments.
The prices set by Universal and its competitor also affect the size of the rental car market
and market share between companies. Higher prices not only affect a customer’s choice
of where to rent a car but also the decision to rent a car at all.