Marketplace Simulation Case Study

SUPPLY CHAIN TASK 2
Cheri Jill Upshaw
August 12, 2014
Task two is the second task that applies the results of the Marketplace
Simulation. In my simulation I named the company Airborne. I used a very conservative approach in all four quarters. The company did not have to borrow any money or pay any carrying charges for inventory. I did however, lose sales in all quarters due to higher than expected sales and product demand. Loss of sales can cause ill will and can cause you to lose customers permanently. However, the increased demand can also create a sort of frenzy to get the product that is not available such as with Apple and the first I phones. In my simulation, I chose Travelers and Mercedes to focus on. Several times the company
ranked high with Workhorse as I continued to focus on
Travelers and Mercedes.
1.

Each quarter of the simulation, I adjusted my decisions based on what

had sold the previous quarter, how much money I had to work with , what other brands were doing and how their sales were doing.
I focused on the smaller, high market segments and geographic markets in the middle of the cost/continuum. The company’s competitive posture was to build a specific market position and defend it while providing the most reliable product on

the market. When companies start out cheap, their reputation is that of building cheap products and that image is hard to shake. What is LG now used to be Gold Star. Customers like and buy LG but older customers that remember Gold Star would most likely walk away and not buy the product just because of that image. So image is very important. With that in mind I chose to target Mercedes and Traveler and build and design according to what the market research stated that each division preferred. I considered the market share. It is every company’s goal to be number one in market share and number one in profits. However, it is more important to make a profit and have a lesser market share. We were number 4 in market share with
Workhorse and that was fine. We were selling a lot to Workhorse but they were not our target group. We did target Mercedes and we were number four.
We did much better with Traveler in that we got number four in market
share but we were number one in market demand. Number one in demand made the simulation decisions I made feel very good. I determined the products by starting out with one well built desktop and one well built laptop targeted each for Mercedes and Traveler and then one lesser built for each. Because
Lightspeed did not sell as well as Light Traveler, I discontinued that brand without having any leftover inventory to carry. I lost 117 sales due to lack of inventory on the Light Traveler. Mathtop did very well and I lost 780 sales

due to lack of inventory. Travelite and Featherlite were about the same in number of sales and lost sales. However, in the fourth quarter, I tried to come up with a break away brand with the Lightening Rod and succeeded. I designed the fastest laptop with a sleek rugged design and loaded it up with travel features while maintaining a competitive price. The company produced
1,625 and the net demand was 3,177. We lost 2,095 sales but we gained the market demand. Based on those figures, I chose to double the manufacturing capacity. That should help the inventory issue without flooding the market and having to lower the prices or having any products leftover. The company should move forward with a number one design while maintaining a good financial foundation.
2.

I really would not change the target markets if I had the chance to do

over. We did very well in the first year to come up with a product that was number one in demand with Traveler while maintaining a good sales record with Mercedes. I did not target Workforce but they did however buy a good volume of computers and gave good reviews. The plan is to continue to target
Mercedes and Traveler while still building a good relation and sales record with Workforce.
3.

If given the opportunity, I would not change the sales offices I chose but I

would have added one in the third quarter. I started with New York which is

here in the United States and it seemed to fit well for the first sales office. I later expanded into Tokyo which made sense because it is a high tech city with a large demand. The third quarter I had decided to expand into South America but I decided against doing so. Instead, I doubled advertising while maintaining a good sales record. I also made plans to double the manufacturing capacity. It does no good to expand into another area if you can’t produce the products for the areas you already cover. Since we had gained the number one demand position with the Lightening Rod brand, I opted to capitalize on that momentum while increasing advertising and manufacturing capacity.
4.

I spent money all four quarters on market research and development. I

would not have spent less. I do feel good about the Lightening Rod attaining number one in demand due to the newest research and development. It was designed to be very fast, be very reliable and was loaded up on features while maintaining a competitive price. Since that brand was so successful, I might have spent more on research and development to try and build on that momentum with another product. I would have liked to have achieved number one in demand with a desktop product also.
B.

I started out in the United States and quickly expanded into the Asian

market by opening a sales office in Tokyo. I was going to expand into South
America the third quarter but I decided not to. We were not being able to fulfill

the orders we already had in the United States and Tokyo so it did not make much sense to open another sales office in another area while we were not being able to fulfill the demand we already had. I opted instead to grow the sales force we already had and increased their salaries and benefits. We were just barely under number one in sales force effectiveness so I increased their compensation package while hiring more sales employees. I also opted to double the manufacturing capacity to fill more orders and increase sales numbers. I felt that if we got better control over the two markets we had and showed we could both fill the orders to meet our obligations in those two markets we would expand into South America the fifth quarter with a good financial foundation and a four quarter successful track record.
C.

Since computers are a world wide need and a world wide product, it only

makes sense to keep expanding into other world markets. There are many factors to consider. First consider the market itself and the demand to determine if Airborne could be competitive in each new market. Determine if the company has the capacity to fill the orders and service those sales. Analyze the political climate and decide whether the area is open to expansion and is safe physically and financially. So far the company has made a profit while expanding. Political unrest could change that quickly. The financial stability would have to be analyzed to determine the startup costs, the labor availability

and the labor costs. The company would also need to determine if it would be smart to manufacture the products in other areas of the world or continue to manufacture in its current location and just expand the manufacturing capacity.
There are several countries especially in Asia that are business friendly to new companies and since we already have a sales office in Tokyo, that is a possible consideration for another manufacturing location. Labor and raw materials would also have to be analyzed to see where they are cheaper but also more readily available. Further considerations would have to be made to evaluate the currency in each market that is under consideration. The economy has been so bad in many countries that there may be cheap raw materials and cheap labor but if the economy is unstable, expansion into those areas would be more risky. Climate itself is another consideration. If the climate is so extreme, the cost of utilities might be of issue. Transportation costs is another consideration.
What mode of transportation would be available and at what costs. After considering the workforce, the demand for the product, transportation, political stability , climate, currency concerns, the availability of raw materials, and the manufacturing, the company would have to compare all of these factors to determine where the best location or locations would actually be more profitable and would carry less risk. While considering all of the issues with other countries, the company would have to determine possible tax issues here

and the effect that further expansion would also have on the company tax obligations. Company stability should never be put at risk purposely. The company would have to maintain a sound financial foundation on which to build on while maintaining a good credit rating and servicing the shareholders.
As the company expands, it will attract more shareholders if done in a responsible manner and those shareholders need to made and kept happy. As the company grows, there will be increasing numbers of stakeholders involved in the growth.
The company will provide more jobs in every sector. As more people come on board, there is potential for labor issues that will have to be dealt with effectively to avoid any unfair employment issues. Labor unions will also have to be considered with any growth and expansions. Certain areas are more prone and accepting of labor unions than other areas. Another possible labor consideration her in the states are the individual state laws and state incentives. Some states are cheaper to operate in while providing large tax incentives if a company relocates in their state or certain parts of a given state.
While international expansion is the main consideration , the company also needs to continue to analyze its’ local operations in the United States. Many companies are so convinced they can manufacture outside the country cheaper that they fail to thoroughly evaluate what is available here in the United States.
In conclusion , Airborne has grown into a viable, profitable company that

in its’ first year produced a product that is number one in demand. Once the local current demand is supplied and serviced, there is no reason not to consider expansion into other
markets.