Capsim simulation writeup
As per the Capsim simulation, there are many changes in the industry resulting from the movements of each player. This paper presents a conclusion that indicates all impactful and pivotal movements in 0-8 rounds. All the industry players began operations with a market share of 16.7% each. The pivotal movement in round one was starting prices high to increase the profit at the start. This resulted in the substantial increase in market share for Baldwin to 20.68% making it the industry leader. In addition, it is evident that everyone stocked out apart from Baldwin, which necessitated increased spending on marketing to attract and retain customers. Moreover, Baldwin limited the cost of production by increasing the capacity more than automation due to the existence of flexibility to change product. This movement helped Baldwin in decreasing the operating costs thereby increasing the net profits to $10,042,856 in Round 2. As a result, the ROS increased to 16.6% which was the highest in the industry implying the company was more profitable than its industry rivals.
In Round 2, the reduction in the price from $40 to at least $35 to move away from high tech market resulted in the decrease in market share for Baldwin. However, the sales revenue increased from $60,457,658 in Round 1 to $75,529,195 in Round 2. This implies a rise in the company’s profitability despite losing some of its market share to its rivals. The increase in profitability can be attributed to the move from the low tech sector to high tech market which still has a reduced level of competition. As a result, the demand for high tech increased from 2592 in round 1 to 3110 in Round 2. This is because the company was in perfect competition regarding R&D and hence produced high-quality, affordable products that were highly demanded.
In round 3, the impactful and pivotal movements entailed putting a lot of investment in Baker as it is the company’s core competency. This movement resulted in the increase in sales for Baldwin from $75,529,195 in Round 2 to $96,300,824 in Round 3, which results in a further increase in market share to 24.73%. In addition, Baker had an ideal performance at the end of Round 3 (6.3) and size (13.7). This implies that Baldwin invested in the long-term growth of its products which attracted and retained more customers. Consequently, the stock price of Baldwin increased by $15.92 in Round3 implying an increase in its performance. Although Baldwin had low accessibility in Round 2 in promotion budget since it did not invest in Round 1, it was still able to differentiate itself from the competitors by effectively providing what the customers want.
In Round 4, the entity adopted a high-cost strategy to respond to the market dynamic in targeting high tech sector. Since there is a gradual increase in demand for high tech, the company increased the capacity to capitalize on this trend. Therefore, the company increased automation by 4.5 and the capacity by 400. As a result, in Round 4, Baldwin experienced massive growth in market share and therefore, the return on sales for Baldwin increased by 19.3%. By having a higher price in Blitz, Baldwin was able to maximize on the market demand because their production capacity was 500 units but the demand was 670. Therefore, lowering the production cost by $3 per unit helped the company in further increasing their sales volume. This is because the company’s charged the second cheapest price than most of the products in the industry and was able to attract and retain more customers.
In round 5, the entity decreased baker price and increased promo and sales budget due to more competitors in low tech. in addition, the company invested on automation and decreased labor price to effectively compete with other rivals. As a result, Baldwin obtained the highest market share of 28.32% as well as a substantial rise in sales revenue to $143,870,299 in Round 5. This was translated into 15.3% ROS, which was the highest in the industry. In round 6, despite the move to decrease the promotion budget due to 100% customer awareness and increase Baker automation from 6 to 7 to reduce labor costs, Baldwin's market share and sales revenue decreased in Round 6. This is because the company charged higher Blitz price in the market which drove away from the customers to Digby whose stock price increased by $19.23. Additionally, the most impactful and pivotal movement in Round 6 was issuing stock for $14,000 which helped the company to afford their investments as well as pay for everything for the sales thereby decreasing the cash position a bit. This movement caused the stock price of the company to increase by $16.15 due to strong financial performance and the increase in demand for its stock due to its good future outlook.
In Round 7, the company when high tech by getting an emergency loan and increasing investment. Also, the move to lower the price of Baker and increase sales and promotion budget helped the company in getting the market share back. However, Baldwin got an emergency loan of $13,936,460 which seems to have caused its stock to fell to $94.17 which impacted the cumulative profit of the company. Therefore, the company should have adopted a more conservative approach in its operations and not invest everything to enhance their liquidity position. Finally, Round 8 shows that the company took an emergency loan which ruined their stock price. In addition, the move to lower the price of Baker to $23 helped in getting back the company’s market share in the low tech market. The company offered $2 dividend that cost the company $4000; however, the move was crucial in helping raise the stock price. In Round 8, Baldwin had 88% customer awareness and 42 customer accessibility which was crucial in increasing its market share. However, Baldwin was negatively affected by Blitz because it was too low tech to be a high tech product. The capacity of the company was ahead of its production thereby incurring a net loss of $2,303,612 in Round 8.