1. Overall Goals:
In the first couple of quarters Powers Inc. began to establish how they were going to compete
throughout the simulation by developing their strategies, goals, and mission statement. Powers
Inc. started with their mission statement, which states that “Powers Incorporated is a European
computer company who is devoted to being the computer industry’s leading innovator, supplier,
and profitable consumer - oriented company. We believe in delivering the highest quality and
most reliable computing products and customer services.” We then laid out the goals we wanted
to accomplish in order to stay ahead of the competition and the strategies we would use to
achieve those goals. Initially, Powers Inc.’s goals consisted of focusing on large markets with
highly competitive segments, even if they are more expensive and controlling the geographic
markets that were in the middle of the cost/size continuum. Our competitive posture centered on
building a market position and defending it, taking the lead and keeping it, and being a fast
follower by imitating smart, competitive moves. Two distinctive competencies that separated us
from our competition were being one of the lowest providers in the market and being the market
share leader. Our strategies consisted of a geographic strategy and a target segment strategy.
Initially, our geographic strategy was to focus on the European, Canadian, and Brazilian markets.
Our target segment strategy consisted of focusing on only two segments: Work Horse and Cost
Cutter.
Initially, our competitive posture goals (of building a market position and defending it,,
taking the lead and keeping it, and being a fast follower), our distinctive competency goals (of
being the market share leader), and our geographic market goals (of focusing on large
geographic markets) were realized. We entered Europe, Brazil, and Canada uncontested and built
brand equity through awareness, market share percentage, and loyalty. This allowed us to
dominate these geographic markets for the first several Quarters because our forecast suggested
that the other competitors would pursue the low-hanging fruit of the major markets in the United
States. However, as time progressed and the market share grew, external competition began to
rapidly increase when NGC, i3, and Refined IT entered the European market and i3 entered the
Canadian market. With this influx of competitors, we had to maintain our competitiveness by
evolving our geographic strategy to now pursue new markets in Brazil and Canada, and expand
into China, and eventually the United States. Despite this geographic expansion strategy, in
which we began to compete in every geographic region, and the fact that we controlled the
markets in Canada, Brazil, and Europe through Quarters 6 and 7, we were not able to continue
the achievement of our initial goals. We lost sight of focusing on the largest geographic markets
by pursuing a full coverage targeting strategy instead of a multi-segment strategy.
As for our target market strategy, we were able to achieve our goal of building a market
position and defending it up until the last couple of Quarters, when we changed our target
segment strategy due to our determination to be a fast follower, the influx of other competitors
entering our markets, and the fact that our competitors were focused on one or two specific target
segments. However, instead of focusing on our initial target market strategy of appealing to CC
and WH segments, other company’s success in other segments motivated us to pursue the
segments in which they had been successful. Thus, we ended up pursuing every target segment
instead of maintaining our focus on the WH and CC segments. Our target market strategy
evolved from a focus on WH and CC to a pursuit of every target segment, from CC, to WH, to
Traveler, to Innovator, to Mercedes. We kept our primary target market of WH throughout the
entire simulation. However, in the last two Quarters we changed our secondary target segment
from CC to Mercedes. Therefore, we were able to achieve our goal of being a fast follower by
imitating competitive moves. However, our decision to change our geographic and target market
strategies got us in trouble in the end. We felt this would allow us to shift from being the lowest
price computer in the market to become the company with the largest profit margin. However,
this strategy caused us to spread ourselves too thin and we were, thus, not able to maintain our
market share leadership or keep our leadership in our initial geographic or target segement
markets.
2. Performance:
Now that we’ve looked at our overall goals, we want to hone in on how these strategies
translated into our performance. In terms of profitability, Quarters 1-4 of the simulation were our
building blocks. Therefore, our profits were minimal or nonexistent during this period. However,
between Quarters 5 and 6, our profitability came into fruition. Our net profit for division
increased from -1.4 million to 3.6 million and our operating profits increased from1.6 million to
6.1 million. This trend would suggest that if we maintained our initial geographic and target
market strategies, we would continue to see an increase in profitability throughout the rest of the
Quarters. However, since our operating expenses doubled from Quarter 6 to Quarter 7, from 5.6
million to 10.8 million, our profits were adversely affected. They dropped from 3.6 million to 2.2 million. The reasons our operating expenses doubled were because we increased instead of
decreased our ad expenses, we continued to modify and create more brands, expanding our
geographic markets, and most importantly, we opened up a sales office in New York, which cost
approximately 1 million, and involved spending money on ads and ad placements, on brand
creation, and on hiring 6 salespeople, which totaled 600,000 dollars.
Consistent with our initial strategies, we were able to successfully be the market share and
demand leaders for the Work Horse and Cost Cutter segments in the most of the Quarters. As
previously mentioned, even though the influx of competitors in our geographic regions and target
markets took away some, but not much, of our market share and demand, we were still market
share and demand leaders in CC and WH, and we still had the highest total market share and
demand. However, with our changing strategies, by Quarter 9 we lost market share and demand
in both CC and WH segments, and we became second in terms of total market share and
demand. This, coupled with increasing expenses, contributed to our loss in profitability in the
last Quarter.
Metri
c
QTR
5
6
7
8
Want +
Want positive
and large
Total
Financial
Performanc Performanc
e
e
9.072
14.237
14.92
19.742
4.191
7.100
0.000
-0.183
>.45
Market
Performanc
e
.365
.465
.390
.295
>.8
Marketing
Effectivenes
s
.725
.765
.788
.760
>3
Investmen
t in Future
3.981
1.897
2.416
1.056
>0; >2
Creatio
n of
Wealth
.605
1.120
.796
.787
Cumulative industry results for last four quarters ending in quarter: 8
Minimum
Total Overall
Maximum
Average
Powers Inc.
0.00
26.07
9.86
5.41
-14.70
17.36
6.00
10.22
Market Performance
0.16
0.49
0.34
0.38
Marketing Effectiveness
0.68
0.76
0.73
0.76
Investment in Future
1.98
4.31
2.76
2.34
Wealth
0.71
1.66
1.16
0.79
Financial Performance
In terms of the metrics of the Cumulative Balanced Scorecard, our total business
performance was positive, which means that we effectively managed our resources, but not as
effectively as some of our other competitors. Our total financial performance was positive and
large, at 10.22, which means that we were able to create profits for our shareholders, but not at
the rate of our top two competitors. While our market performance was under the required >.45
in terms of creating demand in our primary and secondary segments, we were second in this
metric area. In terms of a Quarter by Quarter basis we led this category until the end of the
simulation. Our marketing effectiveness was .76, which was one of the highest scores in terms
of satisfying customer needs through brand and ad quality. Our investment in the future was
2.34, which means that we were just under the threshold of willing to spend investment funds
and current revenues and were the lowest competitor in terms of investment in the future. Our
wealth was .79, which means that we were third. Although cumulatively we were lagging behind
other competitors in the metric areas, a Quarter by Quarter analysis of the balanced scorecard
shows that we were not the highest in every metric in every Quarter, but it was in the last
operating Quarter that we were the least effective because of our changing strategies.
3. Marketing Strategy:
The reason we developed the product portfolio that we did, which consisted of all our brands,
was because we first focused on the Cost Cutter and Work Horse segments and developed brands
based on what the customers’ wants and needs, the price they were willing to pay, and expected
unit sales in each of those segments. These brands were the Golden Saddle and the Stallion. As
we progressed throughout the simulation and analyzed competitor trends, we stuck to our initial
strategy of being a fast follower by imitating competitor moves. This required us to analyze their
brands and offer a competitive differential advantage, which in some cases was price based and
in other cases based on product offerings. In the hunt for profitability, we became focused on
segments with the largest profit margins, which were the Mercedes, Innovator, and Traveler
segments. Thus, we changed our strategy to pursue all segments, instead of just the Work Horse
and Cost Cutter. In doing so, we expanded our product portfolio by developing brands that were
targeted toward every segment. This is evident in the fact that we had more brands than any other
competitor (Stallion IIII, Golden Saddle 2, Thoroughbred, Pegasus 1, the Blazer 1, the Chariot,
and Crown Prussian). Depending on which target segment our brands were developed to appeal
to, all of our brands were effective and achieved a brand judgment of 70 or greater.
In terms of our sales force, our initial strategy was to have a large, effective sales force in
every geographic region: Canada, Europe, Brazil, then China and the United States. Throughout
the simulation we stuck with this strategy, and expanded our sales force in needed, based on
competitor moves and number of units sold in a region. However, by not utilizing the special
sales force programs and under-working our sales force, our sales force was not as effective as
they could have been.
Our initial pricing strategy was being a fast follower (by conducting a competitive analysis)
and taking the average of the price people are willing to pay in each geographic market. For
example, in Europe, we determined the price people were willing to pay in both London and
Berlin for a specific segment, Work Horse. We then took the average of those prices and as the
cost for our product in that geographic market and for that particular target segment. Essentially,
we tried to provide the lowest cost for each segment while still making a profit. We maintained
this pricing strategy throughout the simulation because our pricing judgments for each brand in
each geographic market were excellent. Thus, we saw our pricing strategy as being very
effective.
In terms of our advertising strategy, we tried to design advertisements that persuaded each
target segment to buy a particular brand of our product by creating the right message and placing
it in the right geographic market. A large part of our advertising strategy consisted of being a fast
follower by imitating the competitors’ ads that received good ad judgments. We also determined
ad placement by reviewing media preferences and analyzing competitor’s local and regional ad
placements. However, this advertising strategy was not effective because, even though we were
able to achieve ad judgments of 70 or greater in some of our ads, many of our ads throughout the
geographic regions we were competing in received low ad judgment scores. Our decision to not
decrease the number of advertisements and ad expenses in the last Quarter or two also lead to our
ad strategy’s ineffectiveness.
4. What would the team do differently…if it had a second chance:
If we had a second chance, there are four key items that we would address. The first thing is
that we would apply the intimate knowledge of the Product Life Cycle that we that we learned in
class to construct a more effective marketing strategy, from the introductory stage to the maturity
stage. For example, in the maturity stage of the PLC, companies typically shed unproductive
channels and not necessarily open newer expensive sales offices. We should have opened up all
the sales offices we wanted to open by Quarters 3 and 4. We should have also not changed our
marketing segment strategies in the last Quarters, meaning that we should have stuck with the
Work Horse and Cost Cutter as our primary and secondary target segments. Additionally, we
would decrease our ads toward the end of the simulation rather than tweaking it. Financially, this
would limit our expenditures, and those additional funds would then be spent on research and
development and the sales force programs (incentives).