Suitability and application of selected tools of Strategic Management to Simulation Games (Global Management)

Using the example of the fantasy company "Xeltronics 1"


Seminar Paper, 2020

22 Pages, Grade: 1,3


Excerpt

TABLE OF CONTENTS

Table of contents

List of annexes

List of figures

List of tables

List of abbreviations

1. Introduction

2. Management Tools
2.1 Ansoff-Matrix
2.2. Porter’s five forces and three generic strategies
2.3. BCG-Matrix

3. Application of management tools to the fantasy company Xeltronics
3.1. Description of the business game (TOPSIM)
3.2. Description of the company Xeltronics
3.3. Integration of the Ansoff-Matrix into the business game
3.4. Integration of the Porter‘s five forces and three generic strategies into the business game
3.5. Integration of the BCG-Matrix into the business game

4. Summary

Annex

Bibliography

LIST OF ANNEXES

Annex 1 PARTICIPANT’S REPORT 1: Executive Summary I (Period 6)

Annex 2 Economic Forecast Period 6

Annex 3 Decision Forms Global Management Team 1 Period 6

LIST OF FIGURES

Figure 1: Ansoff-Matrix

Figure 2 Porter’s five forces - own illustration

Figure 3 Porter's three generic strategies - own illustration

Figure 4: The BCG-Matrix

Figure 5 Company locations worldwide - own illustration

Figure 6 Ansoff-Matrix Examples for the company – own illustration

Figure 7 Product portfolio (BCG-Matrix) of the Xeltronics 1- own presentation

LIST OF TABLES

Table 1: Classification of the BCG quadrants – own illustration

LIST OF ABBREVIATIONS

Abbildung in dieser Leseprobe nicht enthalten

1. Introduction

What does strategic management deal with? In the Anglo-American literature, management is used in two variants of meaning. On the one hand, management in the functional sense aims to describe the processes and functions, such as planning, organization, leadership and control, that are necessary in organizations based on the division of labor. Management in the institutional sense describes the people, who perform management tasks, their activities and their roles.1 There are the two main components of the strategy term are the time element and the reference object. According to their ethymological origin, the terms strategy and strategic are strongly associated with the term "longer-term".2

It is difficult to determine precisely when strategic management was established as an independent field of research. The year 1977 is mentioned as the "year of birth", for example, when a conference was held at the University of Pittsburgh in the USA, whose contributions were presented in 1979 by Schendel and Hofer under the title "Strategie Management. A New View of Business Policy and Planning".3 Behind the term "strategic management" is a management philosophy that expresses rethinking. Basically, the group is experiencing a similar phenomenon here as in the 1960s, when the term marketing also signalled the need to rethink after the original sellers' markets had turned into buyers' markets. Although there are many different ideas associated with the concept of strategic management, a common goal can be identified: Strategic management is able to control and guide the long-term evolution of the company.4 The role of the manager is important, but according to a study, almost 85% of the German population think that their salaries are high to high.5

This thesis deals with the necessary of using management tools within a business game. In the first descriptive part, it critically examines the common management tools mentioned in the literature. It is limited to the treatment of three tools: The Ansoff Matrix according to Harry Igor Ansoff, Porters Five Forces (industry structure analysis) and the Business Model Canvas according to Alexander Osterwalder and Yves Pigneur. In the following analysis, the work applies these tools practically to the fantasy company, „Xeltronics 1“. The basis for this is the TOPSIM - business simulation. A conclusion forms the end of this paper, in which the consequences, which result from the connection of the descriptive and explicative part, are presented.

2. Management Tools

2.1 Ansoff-Matrix

Suitable growth strategies are needed to add new products or new business areas to the company portfolio6. The model of the Product-Market-Matrix according to Harry Igor Ansoff presents four options by the company management can succeed in generating growth.7 The procedure serves to link corporate and marketing strategies and is also referred to as a market field strategy when a direction of impact is fixed.8

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Ansoff-Matrix9

One of the options is the „market penetration strategy“. This strategy describes the increased use of marketing activities with the intention of supporting existing products in their traditional markets in order to increase their share and volume. One example of this is the launch of a new innovative S-Class.10 Another method, the Market Development Strategy, with the intention to enter new markets with existing products in order to generate additional sales potential. Mercedes-Benz, for example, pursued this goal with the launch of the A-Class in Japan. Through the Product Development Strategy, the board of Management is pursuing the goal of securing or expanding sales in existing markets with new products. As an example, Mercedes-Benz developed the R-Class especially for the European market in a short version and for the American market in a long version. In the „diversification strategy“, a company moves into new fields of activity (new markets/ new products). As an example, the introduction of the city car "Smart" or the luxury limousine "Maybach" can be applied. The intention here was to distinguish itself from the parent brand.11

2.2 Porter’s five forces and three generic strategies

The formulation of competition strategies essentially consists of putting the respective company in relation to its environment. In this context Michael E. Porter speaks of both social and economic forces. The core lies in the industry in which the company operates. This industry structure determines the "rules of the game" for the further course of the company as well as the strategies available to the company. The external forces only play a limited role, as they affect all suppliers. It depends on the abilities of the managers and employees to cope with them.

Porter refers below (see Figure 2) to five forces that affect the company.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2 Porter’s five forces - own illustration12

The intensity of these forces ranges from weak (e.g. oil production equipment, steel, or cosmetics; the company expects a high margin here) to intense (e.g. tires, paper, and steel; many competitors and low margins).13

The five forces can be described as follows:

- Competitive rivalry: The rivalry among existing competitors manifests itself in the form of, for example, advertising battles, modified products, improved services and guarantees. This results in a reduced profit potential (through falling prices and/or rising costs).
- Buyer power: This is reflected in the fact that customers are demanding lower prices or higher quality and better service. These demands have a negative impact on the earnings situation of the supplying companies. The level of buyer power can be assessed using the same criteria as in the case of suppliers, only with the opposite sign. For example, a high degree of differentiation counteracts the power, as customers incur inhibiting switching costs when switching suppliers.
- Threat of substitute: Substitute products are products which would be in principle suitable to meet similar customer needs as the products of the industry which are not currently in a close substitution relationship with them. They are perceived differently by customers, are aimed at different customer groups or are offered in different regions.
- Supplier power: Due to the negotiating power of the suppliers, they can threaten to raise prices, reduce quality or reduce service. This can lead to losses in terms of sales or the quality produced.
- Threat of new entry: A threat from new suppliers results from their market entry and the associated increase in supply within an industry and the falling price level of their own products. The probability of new competitors entering the market depends primarily on the barriers to market entry such as patents, high investment requirements, lack of space or state restrictions.14

According to Porter, there are three types of competitive strategy that represent a competitive advantage for the company (see Figure 3). At first there is the possibility of cost leadership, the differentiation strategy and the focus strategy.15

Abbildung in dieser Leseprobe nicht enthalten

Figure 3 Porter's three generic strategies - own illustration

a) Differentiation

This strategic form of competition aims at the creation of so-called preferences among buyers of the products. Preferences establish preferential positions for brands in the psyche of the customers. A differentiated offer is preferred by its buyers with regard to non-price features over competitive offers.16

b) Cost leadership

Due to low production costs, the company can offer lower prices on the market. Usually this can be realized by a large output quantity and an efficient production. Within the common literature some economists speak also here of a price leadership.17

c) Focus strategy

The focus strategy is based on a concentrated work in a narrowly defined area of an industry. According to this strategy a company deliberately delimits its relevant market. The company can then try to become the cost leader in this area or apply the differentiation strategy.18

[d) Stuck in the middle Strategy]

The stuck-in-the-middle strategy contains the remaining categories of Porter's three typologies. These are all strategies which do not correspond to these common ones. The company has not managed to achieve differentiation or cost leadership. It is figuratively "between the chairs".19

2.3 BCG-Matrix

The market share/market growth matrix was developed by the "Boston Consulting Group". In this matrix, the "Strategic Business Unit" (SBU) of a company is analyzed to what extent it is positioned within the two-dimensional matrix. On the ordinate, the growth of the respective sub-market measures the market attractiveness. In return, the abscissa shows the relative market share that the company has achieved in this market segment and thus reflects its strengths and weaknesses (see Figure 4). Furthermore, the company's sales are usually presented in the form of a bubble chart.20

Abbildung in dieser Leseprobe nicht enthalten

Figure 4: The BCG-Matrix21

Using this approach, SBUs can be divided into four quadrants or types, which are explained below.22 Classification into one of the four groups is particularly important, as company management can make forecasts about whether the strategic business area will develop if the company shows no activities. On the other hand, the model shows which activities/strategies would be recommended (compare Table 1).23

[...]


1 Cf. Keuper (2011) p. 1

2 Cf. Brauchlin/ Wehrli (1994) p. 3

3 Cf. Göbel (1997) P .3

4 Cf. Kirsch/ Roventa (1983) p. 13

5 Cf. Germany Research Group Elections 2018, statista (2018)

6 The canvas business model after Alexander Osterwalder and Yves Pigneur can also be used for strategic consideration and review.The starting point is the idea that all parties involved in a company must first become aware of the business model of their company. The Canvas business model was developed for visualization and simplification. This model can be used to describe any company or organization C.f. Osterwalder/ Pigneur (2011) p.19

7 cf. Kühn/ Schlick (2001) p. 232f.

8 Meffert et al.: Marketing p. 254f.

9 https://www.smartinsights.com/marketing-planning/create-a-marketing-plan/ansoff-model/ (retrieved on: .2020-06-07)

10 equipment variant in the automotive sector; in the higher price segment

11 C.f. Kotler et. al. (2011) p. 180f.

12 in accordance with Porter (1998) p.38

13 C.F. Porter (1998) p.37

14 C.f. Freiling/ Reckenfelderbäumer (2010) p. 152-154

15 C.f. Müller (2007) p. 33

16 C.f. Müller (2007) p. 36

17 C.f. Müller (2007) p. 34

18 C.f. Habbel (2001) p. 49

19 C.f. Müller (2007) p. 37

20 Kotler et. al. (2011) p. 176 ff.

21 Compare to http://www.manager-wiki.com/index.php/strategieentwicklung/48-bcg-matrix (retrieved on: .2020-06-20)

22 Kotler et. al. (2011) p. 176 ff

23 Uhe (2015) p.33

Excerpt out of 22 pages

Details

Title
Suitability and application of selected tools of Strategic Management to Simulation Games (Global Management)
Subtitle
Using the example of the fantasy company "Xeltronics 1"
College
University of Applied Sciences Georg Agricola Bochum  (Wissenschaftsbereich Elektro-/Informationstechnik und Wirtschaftsingenieurwesen)
Course
Simulation Game
Grade
1,3
Author
Year
2020
Pages
22
Catalog Number
V962847
ISBN (eBook)
9783346313133
ISBN (Book)
9783346313140
Language
English
Notes
The appendices are not included for copyright reasons
Tags
simulation game, Strategic Management, Ansoff, Porter, BCG, Management, Business, industrial
Quote paper
Benjamin Wagner (Author), 2020, Suitability and application of selected tools of Strategic Management to Simulation Games (Global Management), Munich, GRIN Verlag, https://www.grin.com/document/962847

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