Strategic Management – Porter’s Five Forces – Business Simulation Literature

Business Simulation – Strategic Management

Literature Review




Business simulations have become an important tool for students of business and related studies to apply theory to practice, as a learning or experiential tool (Anderson & Lawton, 2009); also useful for mapping out strategies under different scenarios for real world by corporates.


A business simulation also allows students or participants to apply or refine various hard and soft skills including finance, management, marketing, operations etc.  for the former; communication, research, analysis, team work, planning, strategy, report writing and more for the latter (Bingham and Drew, 1999).  Further, team work or group dynamics in simulations can be analysed regarding impact upon any simulation, learning, and also actual business or real world (Malik & Howard, 1996). Learning can be enhanced by the use of business simulations along with conventional forms of education exemplified by reflection, case studies and discussion (Keys, 1977).


In other related study areas or fields, i.e. international relations and political science, student evaluation feedback seems to confirm that simulations help in understanding and applying abstract theories and concepts (Shellman & Turan, 2006).


Studies of business simulations have emphasised the identification and importance of success factors, planning and stable strategy, as part of the decision-making strategy along with team cohesion (Gosenpud et al., 1984).


Accordingly, business simulations such as Global DNA and CompXM have many applications in business from training and development, through market planning, strategy and analysis.


Theoretical Frameworks


There were issues faced by Andrews in CompXM when dealing with competition.  This included more competitive pricing, better specifications or lower operating costs, new or updated products, customer satisfaction and what appeared to be a drift back from performance to budget.


Competition is the main factor in business, in other words, success or failure.  Competitive strategy revolves round long term profitability and what determines it, and how to be competitive in any specific industry. The latter is most important as a company can at least shape a competitive strategy, however shaping an industry is generally not possible.

Competitive strategy can be through two main aspects, cost leadership and differentiation.  These five competitive forces include new competition, product substitution, buyer power, supplier power and existing competition (Porter, 1985).  Based on this a corporate strategist or investor must work out their place in the market via strategy, for example, what are our strengths and weaknesses, what may create best income or which should be observed as opportunities or threats (Porter, 2000)?


Competitive advantage requires any company to meet or exceed customer expectations via the value chain to assess what perceived value is for customers.   The value chain is dominated by internal processes that lead to a product or service outcome e.g. R&D, marketing, production and finance (IMA Institute of Management Accountants, 1996).


Of direct importance is the product lifecycle, especially within innovative industries, exemplified by low barriers to entry, high product differentiation, high innovation while the market can move rapidly.  With maturity, even with further industry growth, fewer new entrants versus exiting, fewer producers, less innovation, less diversity, with more focus upon production processes and market shares stabilise (Klepper, 1996).


Reference List:


Advameg, Inc. (2016) Cochlear Ltd. – Company Profile, Information, Business Description, History, Background Information on Cochlear Ltd. Available from: (Accessed 27/7/16).

Anderson, P. & Lawton, L. Business Simulations and Cognitive Learning: Developments, Desires, and Future Directions, Simulation & Gaming. Sage Journals. 2009 USA.


Austrade, (2016) Industries – Export Markets – Taiwan – Market Profile. Available at: (Accessed 7/9/16).


Bennett & Giancola (2015) Nurotron Biotechnology Wins Tender.  Available at: (Accessed 28/7/16).


Bingham, R. & Drew, S. (1999) Key Work Skills, Aldershot/England: Gower.


Biotech & Pharmaceutical Industries Program Office (2016) Taiwan’s Biotech Industry Overview. Available at: (Accessed 7/9/16).


Bloomberg, (2013) Nurotron Annual Report. Available from: (Accessed 27/05/2016).


Comp-XM (2016) The Globe Report, Chicago, IL: Capsim Management Simulations.


Cochlear (2015) Cochlear Annual Report 2015 – Hearing Performance. Sydney: Cochlear.  Available from: (Accessed: 27/05/2016).


Economist Intelligence Unit (2016) Taiwan Healthcare.  Available at: (Accessed 7/9/16).


Global DNA (2016) The Globe Report, Chicago, IL: Capsim Management Simulations.


Gosenpud, J.; Miessing, P. & Milton, C. (1984) A Research Study on Strategic Decisions in a Business Simulation.  Developments in Business Simulation & Experiential Learning, Volume 11, 1984.


Institute of Management Accountants IMA (1996) Value Chain Analysis for Assessing Competitive Advantage. Statements on Management Accounting. Practice of Management Accounting. Montvale N.J.: Institute of Management Accountants.


Investopedia (2016) Porter’s 5 Forces. Available at: (Accessed: 01/06/2016).


Keys, B. (1977) Review of Learning Research in Business Gaming. Computer Simulation and Learning Theory, Volume 3, 1977.


Klepper, S (1996) Entry, Exit, Growth, and Innovation over the Product Life Cycle. The American Economic Review. Vol. 86, No. 3 (Jun., 1996), pp. 562-583.


Malik, S. & Howard, B (1996) How Do We Know Where We Are Going If We Don’t Know Where We Have Been: A Review in Business Simulation Research. Developments in Business Simulation & Experiential Exercises, Volume 23, 1996.


Porter, M. (1985) Competitive Advantage – Creating and Sustaining Superior Performance. New York: The Free Press.


Porter, M. (2000) How competitive forces shape strategy. Harvard Business Review. March-April 1979 pages 137-145.


Shellman, S. & Turan, K. Do Simulations Enhance Student Learning? An Empirical Evaluation of an IR Simulation, Thematic Issue: Simulations in Political Science, Published online: 24 Feb 2007, pages 19-32 Journal of Political Science Education, Volume 2, Issue 1, 2006.



1 thought on “Strategic Management – Porter’s Five Forces – Business Simulation Literature

  1. Pingback: Australian Business Challenges 2019 KPMG | Education Training Society

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