Business Simulation – Strategic Management
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.
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).
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