CU Business Strategy to win CESIM Global Business Challenge

Cake | Extra | James | Sukree

Overall Results

Die Hard Strategy

Learning

Agenda

Approach to CesimResults


Results Strategy Learning

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Diehard Red Invoke Survivor Statos Kudeta



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Strategy Timeline

Initial Strategy Price War Strategy

High Tech Strategy

Diversification Strategy


• Tech 1: low price, low feature – focus on volume• Tech 2: high price, max feature• Gradual shift from tech 1 to tech 2• Wait for lower R & D price for tech 3 & 4

Approach to CesimInitial Strategy (Round 1-5)


• Price War• Round 1: Loss $6,286, heavy investment in Tech 2

Tech 1: Production > Demand, lose out on priceTech 2: Production < Demand, badly underestimated demand

for tech 2 Tech2 outsource 500 from 2000, demand 1236; lost opportunity

• Round 2: Profit $237,277, rapidly increased tech 2 featuresTech 1: Production > Demand, every group lowers priceTech 2: Production > Demand, overestimated tech 2 growth

Realized Price War had begun Response: slightly lower tech1 price and higher tech2 price except Asia – Die Hard won’t enter price war

• Round 3: Loss $29,382, Die Hard finally No.1 (lowest loss)Tech 1: Production > Demand, price war + promotion war + bad economyTech 2: Production > Demand, more features + higher price + didn’t meet target due to promotion attack from other

groups Die hard didn’t participate in the price war, so managed to avoid heavy losses like all other groups

Approach to CesimOutcome


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Diehard Red InvokeSurvivor Statos Kudeta

• Stage 1: Reverse psychologyEveryone had a lossCoaching (believed that most groups would reconsider engaging in a price war)Expected higher price

• Stage 2: Die Hard’s responseCapitalize on everyone’s decision to increase prices by lowering prices heavily

• Other groups’ response: Some groups increased price as expected!!! , others experimented with new Techs

• Stage 3: Die Hard’s future strategyStay in Tech 1 and 2 + capture the market with fewer competitors + wait for new tech costs to drop

Approach to Cesim1st Coach


• Round4: Profit $156,102, Extreme price dumping• Tech 1: Production< Demand, underestimated demand again (lost opportunity)• Tech 2: Production>Demand, price too high for feature + other groups enter new tech

Approach to CesimOutcome – After 1st Coach


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• Realized that profit potential of old tech was too low• Profit margin too low

• Realized that market does not open up with fewer competitors• Overtaken by “Statos”

Approach to CesimHigh Tech Strategy (Round 5-6)


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• Round 5: Profit $27,660, met targets + groups move to new Tech as expected + falling behind Statos + Die Hard begins investing in new tech + start paying dividend• Tech1: Production ≈ Demand

• Conservative with buffer• Huge price war in Asia

• Tech2: demand > production, wanted to avoid losses from over-outsourcing



• Round 6: Profit $107,901, overtaken by many groups • Tech 1: Production > Demand, consumer move to Tech 4• Tech 2: Production < Demand, other groups moved out + Die hard

allocated more outsource to tech 4• Tech 4: Production >> Demand, promotion + first mover advantage

of other groups resulted in lower demand for Die Hard • Massive loss due to outsourcing 1600 while actual demand was 1100

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• Realized massive potential of Tech 3 (due to Scenario Analysis) + Decided to do low price Tech 3• Die Hard decides to go for every tech to maximize utilization + profit • Capacity constraint set higher price by having all 4 products

Approach to CesimDiversification Strategy (Round 7-10)




Scenario Analysis



Utilization

• Round 7: Profit $140,651, + Begin investment in Tech 3 + stop invest in Tech 4 + Intense Data Analysis + Scenario Analysis• Tech 1: Production > Demand, demand continues to fall except in Asia• Tech 2: Production ≈ Demand, growing in Asia (but smaller profit potential compared to Tech 3), falling in Europe

• Die Hard moved to Tech 4 in US• Tech 4: Production ≈ Demand, set premium price in US and dump the rest in EU; Premium Price Dumping Strategy Created



• Round 8: Profit $341,774, Die Hard returns with a vengeance, Tech 3 drives profit • Tech 1: Production > Demand (constrained due to production capacity)

• Opportunity to increase price • Tech 2: Production > Demand, penetrated the US market at low price

but the market was too small• Tech 3: Penetration Pricing, Production < Demand in Asia; Production>

Demand in EU due to lack of features compared to competitors• Tech 4: Production ≈ Demand, Premium Price Dumping Strategy

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• Round 9: (we thought this was the final round**Plant decision): Profit 519,630, found the way to maximize potential of all techs.• Tech 1: Production<Demand, Asia demand was very strong even at higher price• Tech 2: Production<Demand, market continues to grow in the US, better than expected• Tech 3: Production<Demand; continuous growth in all market• Tech 4: Production<Demand; continue premium price dumping strategy• Reached 100% capacity everywhere• promotion attack drives sales, used instead of R & D

• Round 10: Profit 794,050• Tech 1:Production<Demand, Asia demand was very strong even at higher price• Tech 2:Production<Demand, promotion keeps demand high• Tech 3:Production<Demand, demand marginally affected by higher price• Tech 4:Production<Demand, continue premium price dumping strategy• Die Hard’s strategy pays off• Slightly higher price would have taken Die Hard to No.2 or even No.1• High and continuing growth in profit



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Approach to CesimApproach to CesimAnalyze the Market

Determine Tech for each Market

Create an optimal Production plan

Determine R & D

Set the Prices

Determine the Demand

Tweak Logistics

Decide on Financial Issue Reviewing


Approach to Cesim1. Analyze the Market


• Actual = Budget• See Competitors

?

Approach to Cesim2. Determine Tech for Each Market

• Coverage diagram• Intense Data Analysis• Scenario Analysis


Approach to Cesim3. Create an Optimal Production Plan

Yes NoResults Strategy Learning

Approach to Cesim4. Determine R & D to be Invested

• See competitors’ R&D Expense• See tech growth potential• ROI > Cost


Approach to Cesim5. Set the Prices + 6. Determine Demand


Approach to Cesim7. Tweak Logistics

Tax 38%Tax 22%

Tax 31%


Approach to Cesim8. Decide on Financial Issue

• Constant Dividend payment over the period• Constant Share buyback• Payback debt if cash is still in excess


Learning

Approach to CesimLearning

• Teamwork and Synergy• To anticipate and manipulate competitors’ move • First-move incentives• Understand how market works • Customer demand (Price promotion sensitivity)• Intense Data Analysis (IDA)• Beat-the-Competitor Analysis (BCA)• Learning Curve and Economies of Scale• Premium Price Dumping Strategy (PPD)• Multiple Scenario Utilization• Transfer Pricing and Logistics Optimization• Demand estimation process • Face with reality


Approach to CesimLearning – Teamwork and Synergy


• Time arrangement• Meeting scheduling

• Internet• Face to face• During coaching

• Teamwork and collaboration skills• Everyone attends coaching session• Delegate responsibility• Learn to trust• Utilization of diverse backgrounds• Learn to improve overtime (TQM)

Approach to CesimLearning - Anticipate & Manipulate Competitors’ Move


Approach to CesimLearning – First’s Mover Incentives


Approach to CesimLearning – Understand How Market Works


• Customer’s Perception• Global Economy• Uncertainties• Tax• Tariff and Import Duties• Currency• Competitors

Approach to CesimLearning – Customer’s Demand


Demand (Q) is function of:• (-) Price• (+) Features• (-) Substitute products (competitors, other techs)• (+) Promotion• (+) Length of time in the market• (+) Market growth

Supply = Production Capacity• In-house• Outsource• Capacity Constraints

P*Q

Analyze why they change market over the round• Maybe tech1 performed better

in here than tech2, or they lack capability to produce tech2 efficiently

Determine the tech with the highest revenue

Approach to CesimLearning – Intense Data Analysis (IDA)


Market Growth from the Market Condition

Product Lifecycle• Growing• Peak• Declining

Peaked! And continue declining Declining stage!

Approach to CesimLearning – Scenario Analysis



Approach to CesimLearning – Beat-the-Competitor Analysis



CrackingR & D


CrackingProduction Constraints




Consequences

Learning Curve Production Cost Function


Approach to CesimLearning – Learning Curve & Economies of Scale

• Allow workers to learn• Achieve economies of scale

• Keep the plant utilize• Avoid idle or over-utilize

Approach to CesimLearning – Transfer Pricing & Logistics


Tax 38%Tax 22%

Tax 31%

Approach to CesimLearning – Transfer Pricing & Logistics


Global

Approach to CesimLearning – Premium Price Dumping Strategy






Approach to CesimLearning – Multiple Scenario Utilization


Approach to CesimLearning – Demand Estimation Process






Approach to CesimLearning – Reality


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Die Hard Inc.



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Approach to CesimConclusion

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Approach to CesimConclusion

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Approach to CesimSun Tsu Quote

Thank You

Approach to CesimFeedback

• Does not take into account of overall stability over rounds.• Limited components• Promotion effect over time not clearly defined + first mover advantage• Overall (Can learn more than learnt in textbook + application)• We all enjoy it• Should continue for the future

Note: We claimed an extra point for being the first group to come up with the group name and slogan

Approach to CesimAppendix 1 – Excel Analysis



Approach to CesimAppendix 2 - Results



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Approach to CesimAppendix 3 – Sun Tsu Quotes