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Strategic Marketing

Reflective Report

Word Count: 2462

815825

Contents

Introduction …………………………………………………………………………. 3

Market Report ………………………………………………………………………. 3

Period 2 ……………………………………………………………………………… 5

Period 3 ……………………………………………………………………………… 6

Period 4 ……………………………………………………………………………… 7

Period 5 ……………………………………………………………………………… 8

Period 6 ……………………………………………………………………………… 9

Conclusion …………………………………………………………………………... 10

Bibliography …………………………………………………………………………. 12

Introduction

This report reflects on the decisions and outcomes of Globalman in the Market2Win simulation experience. The class was divided into five different teams, each representing their own elevator manufacturing company – Elevation, Globalman, Liftsoft, Ostrom and SES. The game was designed to represent strategy development and the teams were required to compete against each other over six periods, attempting to decide on the best areas of investment in order to gain the highest market share possible. The overall objective of the simulation was to generate the highest profit and maximise the overall cash flow by the end of the final period.

As a member of Globalman, I was required to apply a range of different strategic marketing planning tools and theories as a basis for our decision making and to maximise our chances of dominating the market. These included SWOT, the BCG Matrix, the Target DPM and Value Mapping and I will cover my use of them throughout this report. As a team, our performance remained steady throughout the simulation but our overall finishing position could have been better. I will be evaluating our performance through each individual period of the simulation, including the stages where we performed well in addition to the areas we could have improved so to better our final result.

Market Report

The report provided an insight into key market trends of the global elevator manufacturers market that would occur over the course of three years (Periods 1-6). Globalman were one of the oldest companies in the market, and saw themselves to be one of the largest engineering firms in the world. From the report, it was evident that Globalman specialised in the development of hydraulic systems and a key decision needed to be made on whether to build upon their hydraulic strength or to move into other products in the market. I decided to use this background information as a means of beginning to develop a strategy from which I would attempt to gain competitive advantage.

After talking over the decision as a team, it was decided that it would be beneficial for us to continue investing a large amount of  money into the hydraulics systems, but also to initially diversify into other products in order to gain a better idea of the market.

Globalman's Profile

Globalman's profile within the industry report helped me to understand the history of my company, as well as learn a few of our strengths and weaknesses going into the simulation, which helped me when developing my SWOT analysis.

• One of the oldest engineering companies in the industry

• Mission is “to be seen as the world's number one provider of advanced engineering solutions” and sees itself as the world's local engineering firm

• Has a specialisation around hydraulic systems and has developed a good global recognition and high market share

• Main concern is their reliance on the hydraulic systems and the question of whether to expand into other markets

Competitor Profile

I also created a profile for my competitors in order to learn a bit more about their company background, as well as to gain an understanding of the potential opportunities and threats that they posed.

Elevation • Holds a leading market share in USA

• Has a good balance of sales across all product lines

• Key concern is whether to drive for a more balanced strategic portfolio

Shanghai Elevator Systems (SES) • Software sales are its smallest product line

• Industry leading market share in China

• Main concern is whether to boost weak areas or strengthen current position

Liftsoft • Almost solely based on being an EU Software vendor

• Youngest competitor on the market

• Industry leading market shares in elevator software

• Main concern is whether to remain an EU software vendor or to become a global solutions provider

Ostrom • Majority of business comes from the EU

• Struggled to break into double digit market shares outside of EU

• One of the most recognised and trusted brands on the market

Week 1 – Period 2

According to the marketing report, China was the fastest growing sector overall, closely followed by EU. In terms of the products, maintenance was the product category with highest growth levels followed by electrical systems and then hydraulics. We attempted to combine this knowledge with the BCG Matrix (Boston Consulting Group). The BCG uses two variables, annual growth and relative market share (Stern & Deimler, 2012) and could be used in the simulation to show valuable areas for investment. These areas are divided into four categories, “Dogs”, “Question Marks”, “Stars” and “Cash Cows”. From this it became evident that it could have been effective to invest in China electrical systems as well as EU maintenance (Figure 1) as these were our “stars”, products in high growth markets with high market share. However, since we had decided to continue investing into hydraulics systems, the decision was made to split the investments.

Figure 1 – BCG Matrix

I conducted a SWOT analysis (Figure 2) in order to identify the most important factors, both internal and external, that could influence Globalman as a business and its markets (Hooley et al., 2012). For example, the high growth rates in the China market presented a good opportunity for investment and domination.

Figure 2 – Globalman's SWOT analysis

Strengths

• World class leader in hydraulic systems manufacturing

• Strong presence in North America

• Recognised supplier of products Weaknesses

• Yet to explore local ventures

• Currently reliant on a single market

Opportunities

• New emerging India & Japan markets in later periods

• Fast China market growth

• Diversify into new markets

• Invest into EU as they hold a large amount of the market share

Threats

• Competition

• Changes in customer needs

Decisions

• Invest into EU & China, particularly maintenance and electrical sectors

• Attempt to dominate the hydraulics sector with high investment

Unfortunately, I had underestimated the competitiveness of the market and it appeared that our investments had not been large enough. By the end of the second period, the performance map revealed that we had failed to dominate in any single market sector (Figure 3).

Figure 3 – Results from Period 2

In reflection to this period, I found the result to be disappointing. Despite conducting research and attempting to use the tools to our benefit, we failed to reach our goals of dominating the hydraulic systems market as well as breaking into the EU or Chinese sectors. In my opinion, our downfall was a poor investment strategy. We had effectively guessed how much to invest into each segment rather than taking a more tactical approach. We also did not understand whether to put our money into people or promotion so put a small amount into each. In hindsight, if we had put more thought into this we could have seen an improvement in our final result.

Week 2 – Period 3

Period 3 represented the first half of the second year and according to the report, there were some significant changes expected for the market and growth was estimated to be lower than in the first year. All four of the product lines were expected to be hit with a growth slow, with hydraulics suffering the most and geographically the majority of sectors would also drop. The exception to this was USA, as an ageing obese population would see an increase in purchasing of elevators. In this period, we made use of the value proposition that was available to us on the simulation, as well as the BCG in order to plan our investments.

Figure 4 – Value Proposition for USA Hydraulics Systems

As mentioned previously, in this period I attempted to make use of the value proposition that was available to us on the simulation (Figure 4). This example shows our value proposition for USA Hydraulic Systems and it is clear to see that we dominated this section of the market in all areas except for the quality of product / service. Maximising the value proposition is a good way to improve cash flow and we did well to meet the requirements of the customer.

Decisions

• Invest in USA hydraulics in an attempt to steal the segment

• Divest from the EU and use this money to diversify into the growing USA market

• Invest in Chinese electrical systems in an attempt to steal

Figure 5 – Results from Period 3

In reflection to period 3, while we still underperformed in terms of maximising our market share, we had improved from the previous week. We managed to dominate the USA Hydraulic Systems, stealing it from Elevation. This was a positive for us as it was the first time that we had managed to dominate in any part of the market and it made us more optimistic for the rest of the simulation. One place that we performed poorly was in the Chinese Electrical Systems as we had planned on investing highly into this, yet ended up in fifth position. Based on the result of this period, we decided that we needed to think more tactically about our strategy and decided to begin using the DPM (Directional Policy Matrix).

Week 3 – Period 4

In period 4, the second half of year 2, the economic problems were predicted to worsen and market growth to continue slowing. Hydraulic systems were forecast to be hit the hardest with electronic systems also suffering, on the other hand maintenance would survive the storm the best meaning it was probably the top option for investment. So far, the total amount of profit that we were making was not great, therefore we were hoping to improve this so to have a higher level of cash flow moving into the final stages of the simulation.

I attempted to make use of the Target DPM (Figure 6), a framework which can be used to classify and categorise an organisation's business activities in terms of its strengths, capabilities, or market position, and the way it perceives markets to be attractive (Meldrum & McDonald, 1995). Producing the DPM helped me to understand the areas of the market which had the best potential for growth, allowing us to further develop our strategy.

Figure 6 – The Target DPM Decisions

• Continued to invest a small amount into hydraulics to remain leaders.

• Invested highly into maintenance as it had highest potential growth after economy problems.

• Continued to invest into other segments based on the DPM and Value Proposition.

Figure 7 – Results from Period 4

In reflection to period 4, while they still were not amazing, this was my best set of results yet. The strategy to diversify into the newly emerging India market had been successful as Globalman dominated the maintenance sector, and our attempt to hold our position as leaders in the USA Hydraulics segment had paid off. The use of the DPM model clearly had a positive impact on the team performance and I had now developed a much better understanding of how to prioritise our investments. Prior to this period, I didn't have much knowledge on what the DPM was or how to incorporate this into business strategy, but now felt that I would be able to use this in the final two periods in order to gain the best results.

Week 4 – Period 5

Period 5 represented the first half of year three and a general economic recovery was predicted. Software would recover the best, shortly followed by hydraulic systems, with maintenance posting the slowest growth. Geographically, the EU would continue to slow and even risked slipping into a negative growth, while the other areas would see more growth with the new India market contributing to this. In this period, I did not make use of any new tools, but instead continued to base my decisions off the value proposition and the DPM.

Decisions

• Began to divest from sections in the market that were showing a slow or a drop in growth.

• Continued to invest into the fast growing India market as well as Hydraulic systems

• Invest money into the new Japanese Energy Recovery sector

Figure 8 – Results from Period 5

The results from period 5 were poor and disappointing. While we failed to steal any new segments from the competition, we also lost the India Maintenance meaning the only part of the market where we were dominant was in USA Hydraulics. Luckily, the fact that we had decided to divest from some of the less successful areas in the market meant that our profit actually saw a slight increase. In hindsight, I probably should have made the decision to divest from these failing markets earlier as our money was running short and we were unable to make substantial investments into some of the segments we were attempting to capture, meaning that it was easier for competitors to hold from us. While I did not learn how to use any new tools in this period, I did learn how easy it is for segments to be stolen from you without putting proper consideration into the decisions you make.

Week 5 – Period 6

Period 6 was the final phase of the simulation and represented the second half of year three. The global economy problems had been resolved and there was to be growth all across the market, with software seeing the highest rates. The EU was also predicted to recover from their past problems and across the globe, high rates of growth were predicted. This was the final opportunity for us to make as much of an impact on the market as possible and to achieve this we decided we needed to invest high across the market, particularly into hydraulics and into the software segments.

Decisions

• Divest from Electrical systems across the globe with exception to Japan which showed high growth

• Invested money in USA hydraulics which we currently dominated, in an attempt to hold

• Dropped the number of people working in Electrical systems in order to give us more money to spend on promotion in other segments

• Invested in Software across the market as a result of the predicted growth

Figure 9: Results from Period 6

Figure 10: Final Standings

Despite the opportunity that was available in this period, we got our strategy completely wrong and shockingly, the results were our worst of the whole simulation. While we had the right idea, withdrawing money from segments that had a lower rate of growth and investing instead into the thriving software market, it became obvious that we had managed our investments poorly throughout the process. At the end of period 6, we had failed to dominate a single segment in the market and were the only team to do so. We finished the simulation in 4th position and this reflected our performance throughout the game.

Conclusion

Prior to taking part in the simulation, my knowledge on strategic marketing and the different tools involved was questionable. While I did have a small amount of experience in using the BCG Matrix and Value Mapping, it was limited and I didn't know how to implement this into a real life situation. However, from my experience in the game, my knowledge on these has been significantly improved and I was able to use them to my advantage in the different periods. I now feel that I would be much abler to make strategic decisions in the future, using these tools to help me do so.

One tool that I still do not have complete understanding of is the DPM. While I attempted to use this in the strategy, I was unable to use it to my advantage. I feel that I still need to learn the best way to use it to gain competitive advantage.

Overall, my experience of the simulation was one of positive nature and a huge benefit to my own personal skills. I believe that my downfall in the simulation came from my lack of immediate understanding about the need to divest from certain segments and investing into specific areas rather than balancing money across the market as this significantly affected my level of cash flow. If I were to do this again in the future, I would make sure this is something that I consider and it could help me to achieve a better overall result.

Bibliography

Hooley, G., Piercy, N., & Nicoulaud, B. (2012). Marketing strategy & competitive positioning. Prentice Hall/Financial Times

https://doi.org/10.1007/978-1-349-13877-7_26

Meldrum, M., & McDonald, M. (1995). The Directional Policy Matrix. Key Marketing Concepts (pp. 133-139). Palgrave, London.

Stern, C., & Deimler, S. (2012). The Boston consulting group on strategy: Classic concepts and new perspectives. John Wiley & Sons.

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