Introduction
The purpose of this report was to discuss the experience of participation in a marketing simulation game completed during the marketing class. Simulation games are of great importance for business learners, as they help apply knowledge to simulated situations. According to Fu, Hainey, and Baxter (2016), simulators enable an in-depth understanding of marketing concepts and provide players with firsthand experience of organizing a business that they would not otherwise have.
The primary purpose of the assignment is to evaluate the results of the simulation game, in which our team was tasked with running a company that manufactures carbon bicycles. First, the paper focuses on the strategic plan developed for the company’s growth over the entire eight quarters. The plan was created based on the concepts of strategic planning and SWOT analysis. After that, the company’s performance during the eight quarters was discussed using the year-end balanced scorecards.
The paper also includes a discussion of financial tactics used in light of the prioritization of long-term financial success over short-term results. Additionally, this report examines marketing tactics and their success over two years. The paper concludes with a summary of the findings and recommendations for future players to achieve greater success in the simulation game.
Strategic Planning
Strategic planning is a crucial step in organizing any business. According to Simerson (2011), strategic planning involves leaders making decisions regarding the company’s vision, mission, and both short-term and long-term objectives and goals. For our team, strategic planning was of utmost importance, as we had numerous decisions to make regarding the company’s strategic direction. The first quarter was characterized by three central tasks: setting up the division, naming the company, defining marketing responsibilities, and conducting a market survey.
The company was named The Carbon Bike You Like (CBYL), which was directed by requirements for choosing a company’s name. During the second quarter, we needed to create vision and mission statements, select a different strategic direction, and create brands. During the third quarter, we need to establish prices for bands, hire personnel, and set sales goals. The fourth quarter was dedicated to evaluating the marketing strategy as a whole and making necessary adjustments to meet the set plans.
Strategic planning is typically based on the analysis of both internal and external environments. One of the most frequently used instruments for strategic planning is SWOT analysis. A SWOT analysis is a powerful tool that examines both external and internal environments to identify strengths, weaknesses, opportunities, and threats (Humphrey, 2005). The analysis helps to determine whether the current marketing strategy leverages the company’s strengths and opportunities, while addressing weaknesses and threats (Dyson, 2004). The SWOT analysis for the environment of the CBYL is as follows:
Strengths:
- Strong diversified management team.
- Sufficient starting capital.
- Innovative technology of carbon bikes.
Opportunities:
- High demand for bikes in the NorAm-Europe region.
- Customers are willing to pay high prices for ‘Speed’ and ‘Work’ segments in New York and other cities of the NorAm-Europe region.
Weaknesses:
- No brand awareness.
- Undeveloped networks.
- Undeveloped processes.
Threats:
- High competition in the NorAm-Europe region.
The company selected two market segments among the bicycle choices: Youth, Work, Recreation, Mountain, and Speed. We chose the segments ‘Work’ and ‘Speed.’ We prioritized work as the primary focus and speed as the secondary priority. The potential demand for work and speed bikes was the highest, as opposed to youth and mountain bikes, due to the size of the market and the potential profit. The market was a niche market overall due to the 3D printing of carbon bikes. The SWOT analysis demonstrated that it would be beneficial to start in the NorAm-Europe region due to high demand. It was also decided to set up the first shops in New York and Amsterdam.
Vision and mission statements were also crucial to the company’s success. The importance of mission and vision statements is hard to overstate. According to Taiwo et al. (2016), “the most crucial step in strategic planning is formulating the vision and mission statements” (p. 127). The statements can be used by senior management as a strategic tool to rationalize day-to-day activities and help all stakeholders understand the purpose of their actions (Taiwo et al., 2016).
Moreover, they are vital for identifying the goals and objectives of a new business. Our mission statement was “To provide the ultimate biking experience to all bike lovers, by guaranteeing a high-quality, yet affordable carbon bike product, that offers a sense of prestige.” Our vision statement was “We envision the CBYL to be the #1 provider of choice for quality, stylish, and affordable carbon bikes by 2024 and beyond, with the visualization of successfully penetrating the global marketplace.”
We utilized the Ansoff Matrix for Market Development to determine the optimal market development strategy (Khairat & Alromeedy, 2016). It was decided to focus on the largest market and gain the highest market share there. It was assumed that moving to new markets would be associated with high amounts of risk without a stable base in one region. The company created a competitive advantage by attending to customers’ needs, which included pricing policy, ease of ride, safety, and practicality for the work segment, as well as speed and light weight for the speed segment.
Optimizing R&D and Digital Marketing
After the first four quarters, the company had sufficient information to adjust the performance of brands, ensuring that the goals were achieved. Thus, during quarters 5-8, it was planned to modify according to the evaluation of the company’s performance, including financial, marketing, internet marketing, and market research surveys. According to Troisi et al. (2020), data-driven decisions enable rapid adaptation to rapidly changing environments. However, our top priority was to keep our overall strategy aligned with the company’s vision and mission, as this was crucial for ensuring the congruency of decisions (Kotler et al., 2015).
We also set performance goals for the company for Quarters 5 through 8. The primary goal was to reach maximum market share by the end of Quarter 8 in the work and speed segments in the NorAm-Europe region. According to Gale (1972), market share is a key factor in achieving profitability and sustaining financial performance. Regarding the company’s financial performance, the goal was to maintain industry averages in the regions and segments of its presence in terms of profitability. According to Kotler and Keller (2012), industry averages are crucial indicators that help to benchmark a company’s performance.
We did not expect fast growth of the company in terms of profitability, as the primary focus of the company’s performance was to ensure long-term performance achieved through investments in R&D. While investment in R&D may be associated with losses in profitability in the short-term, however, innovation leads to a sustained market position and improved corporate image (Petrović & Lobanov, 2020). Thus, the company’s overall strategy was to maximize investment in R&D to increase its market share in the regions of operation.
The company’s overall market strategy was to establish a strong presence in the North America-Europe region, then transition to the Asia-Pacific region, and subsequently expand to the Latin America-Middle East Africa region. The primary reason for this order of expansion was that it was relatively cheaper to expand the APAC region first, which allowed the company to maintain a strong presence in the NorAm-Europe region without diverting significant funding to the new market. Such a strategy was also expected to help address the effect of intense competitive rivalry in the NorAm-Europe region.
The Carbon Bike You Like also acknowledged the importance of internet marketing. According to Dodson (2016), digital marketing allows high penetration into the target markets. Moreover, digital marketing enables individualized advertising, which can enhance conversion rates (Visser, Berry, and Sikkenga, 2019). It was decided to maximize investment in paid search engine marketing and optimize investment in social media marketing, with an increased emphasis on video sharing, blogging, and social networking, as suggested by the graph in Figure 1.
Performance Assessment
During the first quarter, the company was established, which included naming the company, hiring the team, opening the first outlets, and making strategic decisions concerning market penetration. The company was named “The Carbon Bike You Like” to meet several requirements of the company’s name. According to Negreyeva and Shashenkova (2013), a good company name should meet several criteria. On the one hand, the company name should clearly convey what the company does and how it does it.
The selected name made it evident that the company manufactures carbon bikes, and it does so in a way that pleases customers, which emphasizes its customer-centric approach. According to Lisa, Ibrahim, and Borges (2020), customer centricity is an effective strategy for start-ups, allowing them to capture large market shares. On the other hand, the name was easy to remember, which is also crucial for a successful company (Negreyeva & Shashenkova, 2013). However, the name was too long, which was a significant drawback.
The first four quarters were associated with two major concerns. On the one hand, the Customer Union has not recommended any of the firm’s brands in the segment for customers, which has negatively impacted demand. On the other hand, the International Advertising Federation did not approve of the quality of any of the company’s advertisements, which also hurt the demand. As a result, the company’s overall market performance was poor (0.295), indicating that it was not meeting its long-term goal of securing the highest market share. The creation of new brands was needed, and the advertisements required redesigning; however, none of this was done immediately in the fifth quarter.
The overall company’s financial performance was fair at the end of Quarter 4. The company’s score of 25.047 was above the average of 8.132. However, it should be noted that the average score was significantly skewed by the underperformance of Wheelie Good Bikes, which had an overall score of -72.293 in terms of financial performance. Thus, our company’s financial performance is acceptable, as it took third place among four competitors. The overall effect on the total score was negative.
The CBYL underperformed in terms of marketing effectiveness during the first four quarters. The overall marketing effectiveness score was 0.66 with a benchmark of 0.8. This implied that the quality of the brands and ads was poor, as stated by the International Advertising Federation and the Customer Union. However, none of the competitors reached the desired benchmark with an average marketing effectiveness in the industry of 0.707 and a maximum of 0.753. This performance is incongruent with the company’s goals, vision, and mission. The overall effect on the total score was negative.
The company’s investment in the future was the lowest among the competitors after the fourth quarter. The company’s score was 4.304 with an industry average of 9.520. However, the performance was congruent with the company’s goals, as we did not want to expand geographically, and the investments in the R&D were not yet available. The overall effect on the total score was negative.
The company had the second-best performance in terms of creation of wealth, with a score of 0.895 and an average score of 0.763, which was the only positive contributor to the total score. However, the overall performance of the company was the second-worst, as Wheelie Good Bikes had a total performance of 0. In summary, the results for the first four quarters were concerning. The balanced scorecard for Quarter 4 is provided in Figure 2.
Even though the company’s performance improved in quarters 5-8, the CBYL finished in second place, according to the player standings. The primary weaknesses were financial performance and the company’s investment in its future. At the same time, the company’s significant strengths were market performance and market effectiveness. The results of Quarter 8 are summarized in the figure below.
Financial performance was poor, with a score of 35.894, placing the company in second-to-last position in the standings, which negatively impacted the overall company’s performance. However, the difference between the top performers and the CBYL was less than 7 points. Moreover, it was expected that the company would have smaller operating profit margins compared to others, as its mission was to provide high-quality bikes at reasonable prices. Therefore, although the financial performance was poor in comparison to competitors, it was in line with the overall strategy.
The CBYL had the second-best performance in terms of market performance, with an overall score of 0.4, compared to the maximum score of 0.455. Market performance aligned with the company’s strategy and made a positive contribution to the total score. Similarly, marketing effectiveness was the highest among the competitors with an overall score of 0.908 and an average score of 0.846. It also had a positive impact on the overall score. It was consistent with the company’s strategy to establish customer trust.
The company’s creation of wealth was average, finishing third with a score of 1.28. In other words, The Carbon Bike You Like managed to add 28% of value to the overall investment of Corporate Headquarters, which was $4,000,000, in two years. While the return on investment negatively contributed to the company’s overall score, it was acceptable and aligned with the company’s overall strategy.
Investment in the future was another weak point that negatively impacted the company’s overall score. In particular, the firm’s score was 3.896, with an industry average of 4.465. The company had the highest investment in the future when it was needed. For instance, in Quarter 5, the company had a score of 11.295 for investing in the future, with an average of 9.325. Since the company researched all the needed technology and did not want to invest in new outlets, the overall score decreased, which was in accordance with the overall strategic plan.
If the game were to continue, the plan would be to adhere to the company’s overall strategic plan. In particular, the company will continue to expand into new regions to increase its market share in the primary segments of interest. The Carbon Bike You Like established a powerful presence in the North America-Europe region, and it would continue to grow in the Asia Pacific, Latin America, and Middle East Africa regions.
Tactics
The company’s overall financial performance was strong and consistent with its overall plan. The tactic was to focus on long-term rather than short-term results. In other words, the goal was to avoid managerial myopia, which may lead to gradual deterioration of financial performance over the long distance (Cannon et al., 2020; Kolasinski & Yang, 2018; Kraft, Vashishtha, and Venkatachalam, 2018; Schuster, Nicolai, and Covin, 2020).
In real-life situations, it is crucial to sustain the trust of investors with good short-term performance (Conaway & Laasch, 2017; Morden, 2017). However, in the simulation, the trust of the investors was not a significant concern, and the focus on long-term results appeared natural. During the first year of performance, the company’s return on investment was very low, which may have affected the trust of the investors in real life (Friedlob & Plewa, 1996; Krizanova et al., 2019).
The point of the financial strategy was to maximize revenue through high market penetration. According to Kotler and Keller (2012), a high market share is associated with higher net profits and profit margins. However, the focus of the CBYL was to achieve a high profit margin, as its mission was to provide customers with top-quality bikes at an affordable price. In other words, the company selected the “stuck in the middle strategy” from Porter’s generic strategies, which is very difficult to execute (Islami, Mustafa, and Topuzovska Latkovikj, 2020).
The company was successful in executing the strategy due to using proactive thinking and early commitment of resources (Kotler & Keller, 2012). The managerial team understood that early commitment may be associated with a strategic advantage and invested promptly to maximize returns. In summary, while the profitability and returns on investment were comparatively low, this was in accordance with the overall strategy, and they were expected to continue rising in the future.
Marketing Performance and Effectiveness
The company was the top performer in terms of marketing effectiveness and the second-best company in the industry in terms of marketing performance. The company’s central focus was to achieve the highest market share through optimal pricing and effective advertising. However, the company experienced significant problems with Customer Union, as the brands did not serve the customers’ needs. While the problem was addressed by Quarter 6, the issue with the International Advertising Federation lingered until the end of Quarter 7.
The central problem was the ineffective use of market research and the experience of other companies to modify the marketing strategy. According to Horváthová, Mokrišová, and Vrábliková (2021), benchmarking is one of the central instruments for finding risk factors in marketing and addressing them preemptively. Additionally, market the use of market research is also crucial for making informed decisions about the marketing strategy (Kotler & Keller, 2012).
The pricing strategy was stable throughout the simulation. The pricing strategy was based on two decision-making criteria. On the one hand, the maximum prices that customers were willing to pay according to market research were considered.On the other hand, The Carbon Bike You Like considered the prices of the competitors and tried to lower the prices. In other words, the company utilized a competitive pricing strategy, which was considered the most effective. The strategy chosen was Bowman’s hybrid strategy, which seeks simultaneously to achieve differentiation and a low price relative to competitors (Kotler & Keller, 2012). The strategy allowed the company to achieve the desired goals.
Group and Personal Takeaways
There are several aspects of marketing that we collectively understand. First, we understood that it is crucial to distribute the responsibilities according to the abilities of every individual (Hoogendoorn, Parker, and Van Praag, 2017). Second, setting group norms and decision-making rules is crucial to ensure congruency and effective communication (Taggar & Ellis, 2007). Third, having a designated leader helps to improve the decision-making process (Taggar & Ellis, 2007). Initially, we sought equal rights, but the decision-making process was ineffective. These were the three most valuable lessons we pinpointed.
My primary responsibility was VP-Brand Management, and my secondary role was Advertising Management. As an individual, I realized it is beneficial for decisions to be discussed by the decision-makers with the group, regardless of the level of expertise of the decision-makers. Group members may have valuable insights from other areas of running a business, which may be used in my sphere of responsibility.Additionally, I learned the value of evidence-based decision-making, as I was struggling to create the best-performing brands and advertisements without studying the market research reports and the performance of the competitors.
Conclusion
Simulation games are beneficial for learning the basics of marketing in practice.This paper demonstrated how strategic planning and tactics can affect the company’s long-term success. First, this paper suggested that the firm’s governance focused on long-term success through deep market penetration, utilizing innovative technology. Second, the paper analyzed the company’s success using year-end balanced scorecards and highlighted the problems and strengths. Third, the paper focused on financial and marketing tactics, identifying the key personal and group takeaways.
The analysis demonstrated several weaknesses in the simulation game performance that can be addressed to improve the results in the future. It was identified that the central problem was the failure to use in-depth market analysis to create popular brands. Even though the pricing of the brands was adequate, they failed to meet the needs of the target segments, which led to drops in demand. Additionally, the advertisements failed to appeal to the target audience, resulting in unfavorable outcomes. The recommendations provided below are expected to help future players demonstrate better performance.
Recommendations
The recommendations provided below are based on the experience of the simulation game.
- Conduct an in-depth analysis of the market. Evidence-based decision-making is crucial in marketing, as it allows for predicting the company’s performance. Thus, it is crucial to always invest in top-quality market research and study of the competitors to make informed strategic decisions.
- Create brands that meet the needs of the target segments and cost the price that they are willing to pay. Brand designs should be based on customers’ current and future needs, as discovered through in-depth market research. The prices for the brands should be in accordance with their value proposition.
- Advertise the value of the brands through appropriate channels. The customers must know what they are paying for. Therefore, the marketing team needs to deliver accurate knowledge to the customers through the most convenient channels for the customers.
- Pay close attention to group dynamics. All the key personnel must be in place to generate value for the shareholders.
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