Forecasting Supply and Demand
Decision Period 1
What did you learn from last period's results?
N/A
What results do you expect from your current decisions?
Due to the fact that I am just entering the market, the decisions for this period were extremely conservative. Producing only 150 units, I hope to have little, if any, inventory left at the end of the period for reasons specifically tied to costs. As part of my marketing strategy, I hope to get a better feel for overall demand in the market and position the company accordingly. Moreover, I expect to see how consumers respond to pricing and product features that differentiates it from competitors. In particular to pricing, I would like to see if price is elastic or inelastic, which will be one of the factors in help me determine whether the product is homogeneous or heterogeneous. Having said that, I would like to brake even by next period and become profitable by the end of the fifth period.
Decision Period 2
What did you learn from last period's results?
Demand, surprisingly, exceeded supply seven fold. This tells me that my pricing strategy was disappointing because I sold below competitors average suggested retail price by as much as twenty percent. As I suspected, the company is operating at a loss. Anticipating a loss, I am still unsure of increasing production because last period's demand could have been just for that period and may not be the case for following periods to come. No definite conclusions can be drawn from just one periods results, so I'll remaining conservative for the time being.
What results do you expect from your current decisions?
I decided to keep each decision unchanged. My reasoning behind having identical period decisions is to determine if results for this period is consistent with next period's. If so, I will assume that a trend is developing and I will be able to adjust my entries more favorably with the intent of turning a profit (ending net worth for this period is -$4,090 million). Although I am still unsure, I suspect that this product is a shopping good and classified as homogeneous. My current decisions will help me establish a foundation in categorizing the product and in doing so, it will aid in the future decisions dealing with consumer advertising and trade sales promotions. Moreover, I will consider adding extra gadgetry to the widget to differentiate the product from competitors if I do find, based on next periods result, that the product is homogeneous.
Decision Period 3
What did you learn from last period's results?
My intuition from the previous period was right. This product is a shopping good and can be classified as a homogeneous item. I have decided, based on secondary data that consumer advertising and trade sales promotions will have a minimum budget of $500,000 each period regardless of whether the company is operating at a loss. In line with demand, I have also decided to increase production by thirty-three percent (I was restricted to go beyond this number by the game due to, according to the computer, previous sales). Despite the overwhelming demand by the consumers, I am disappointed to report that the company is still operating at a loss of a little over four million. Forecasts of expected profitability will be pushed back two periods to the seventh. Not good news to investors on Wall Street. Good thing this is a computer simulation.
What results do you expect from your current decisions?
With the increase in production by thirty-three percent, I hope to reduce the company's debt, slowly, but surely. In addition, in my efforts to turn a profit, I have increased the price of the widget. Although, the price increase was not for the purpose of reducing the company debt. The reduction of accumulated debt is just an added bonus. I want to know if pricing is sensitive in the market so I can align my pricing strategy accordingly. So far, it doesn't seem to be a critical factor in consumer purchases. A possible candidate for a specialty good, but there is not enough data available to be certain.
Decision Period 4
What did you learn from last period's results?
Company expenses still exceed revenues and debt has accumulated to six million. Demand seems to be relatively strong with widget inventory depleted every period. With such positive results, I will increase production from 225,000 to 337,000. I will also keep the current price of the widget at its current mark. Based on secondary data at the end of each period, pricing has been free to fluctuate without affecting demand. So far I've priced the widget at or a little above the industry average. It would be interesting to see if I set prices well above the high. This will be considered in future decisions as soon as the company turns a profit.
What results do you expect from your current decisions?
As part of the company's cost cutting measures, consumer advertising will be reduced by forty percent and trade sales promotions by fifty percent. I still believe that demand will not suffer and inventory will be depleted at the end of each period. The reduction of product quality was an option, but I really didn't want to change this because it may affect how the consumers perceive the product and ultimately degrade the brand that I have spent so much money promoting with the intent of building brand insistence. The current decisions can be directly linked to the company's efforts in attempting to differentiate the widget from competitors in the same market segment.
Decision Period 5
What did you learn from last period's results?
The company has reduced total debt by two million, but not nearly enough to cover the accumulated debt that the company has acquired since period one, which exceed four million and rising. On the subject of negative news, the demand for widgets seem to have peaked, thus entering its maturity stage. However, there is still not enough data to determine whether environmental factors may have skewed the overall demand. Next period's result will help give a better picture in were the market is headed.
What results do you expect from your current decisions?
No decisions were altered for this period. However, I did consider laying off workers. Expenses for salaries alone top one million dollars. Nevertheless, if this were an actual case, I would not cut anyone from the payroll and I strongly believe that it is in the best interest of the company by maintaining moral and in keeping productivity constant with company goals. In doing so, I have decided not to layoff any employee no matter what the cost. This would also apply to the company's code of ethics and social responsibility to the company as a whole as well as the community it does business in. There will be no downsizing taking place in this company. I will just have to find other ways of cutting costs. Projections in turning a profit has been pushed back once again to the tenth period due to the refusal of reducing staff workers.
Decision Period 6
What did you learn from last period's results?
Debt is getting out of control. I'm surprised that the game hasn't fired me yet. If there was one thing I would change about the game, it would be the manufacturing limitation. In every period demand has exceeded supply and that only leads to lost revenue for the company. In a way it's discouraging because I don't think this company will ever turn a profit. Nevertheless, I remain optimistic. This product has a lot of potential and with the right marketing mix in place, I believe I can turn this company around and redeem my position as a marketing major student at Cal Poly.
What results do you expect from your current decisions?
I have increased production to a total of 400,000 units. At this point, the company should be able to pay off all debts within the next two periods and turn a profit by the eighth period. I would like to note, however, that this forecast also takes into consideration that all inventories is depleted at the end of each period. I have also increased prices a little above the industry average because by now consumers should have preference on the widget and hopefully insistence. Despite the temporary stalemate of the company's advertising budget, due to financial difficulties, I still think that brand loyalty will being the key in a high turnover.
Decision Period 7
What did you learn from last period's results?
I have obtained enough secondary data to conclusively draw answers that I have be trying to determine since period one. This product is in fact a homogenous item, which means I have to seriously start taking into consideration adding new unit gadgetry to differentiate my product from competitors. I would also have to segment the market by age, possibly income, and definitely by gender because I think that the product is typically used by males. For the first time since period 1, I have 123 units of ending inventory, which means I had to pay inventory holding costs.
What results do you expect from your current decisions?
Production has increased again to a total of 450,000 units. To ensure that no inventory is left at the end of the period, I have increase consumer advertising and trade sales promotions by fifteen percent. I would like to point out, however, that I believe trade sales promotions have been, over the progression of each period, has played a critical role in boosting sales and moving inventory. The reasoning behind why this may be the case is because the widget is a shopping good. Another significant change was the increase of product quality by forty percent. This was just part of the company's long-term efforts in instilling into the consumer's minds that our product is better than any other competitor on the market. Simply put, product differentiation strategies.
Decision Period 8
What did you learn from last period's results?
After acquiring the necessary secondary data, I have worked out a plan that seems very promising. So far it seems to be working because I've gotten bad debt down from a little over five million to just above one million. Again I have to complain about the manufacturing limitation in the game because production is not running at full capacity, which is causing lost revenues. The increase in advertising last period paid off because inventory was depleted by the end of last period. This is fantastic news for the company because I don't have to pay any inventory holding costs.
What results do you expect from your current decisions?
I have added additional gadgetry to the widget, which now has a total of three. This decision was first and foremost implemented to keep up with competition. On the same token, the addition of the gadgetry was put into place to level off the market. Companies who are unable to keep up with extra features would have to exit the market, leaving me with one less competitor to worry about. For some odd reason, the game would not let me manufacture more than 450 units. The only possible alternatives now are altering quality and gadgetry. In spite of the high probability of demand leveling off in the coming periods, I still think that inventories will remain low at the end of the period. The company has set a target status quo of moving a minimum 350,000 units per period.
Decision Period 9
What did you learn from last period's results?
Over the past few periods, I have noticed that this company has been a very flexible channel. I have increased consumer advertising when demand seemed to not be at were I hoped it would be, adjusting price when necessary compared to competitors in the market, and increasing production when demand exceeded supply. So one could conclude that the channel of the company is fairly short. Speaking of channels, the company may possibly work under a dual/selective (shopping good) distribution method. Secondary data has been a valuable asset in the company because without it I wouldn't know how the market is reacting to the product until it would be too late to do anything about it.
What results do you expect from your current decisions?
I have increased prices again. This time, however, it is well above the industry high. Seven percent price hike compared to the industry high of sixty-three to be exact. What I should have done was skim the market when I first entered so that profits would be maximized and slowly lower price as more competitors entered the market. Nevertheless, this probable would not have worked because I was new in entering the market with the widget.
Decision Period 10
What did you learn from last period's results?
Previous period results confirm that this product is in fact a shopping good, which means that I will have to consider increasing trade sales promotions. As a future reference, I will devote a portion of the company's budget in maintaining the trade sales promotions at or above 700,000 from this period on. By doing so, I think this will give the company a competitive advantage and hopefully increase profit margins. What I should have done was increase consumer advertising and trade sales promotions at the same time when I increased price. I was left with a large amount of inventory at the end of the period. Nonetheless, it may have not been associated with price and could have just been unfavorable market conditions.
What results do you expect from your current decisions?
I have increased consumer advertising and trade sales promotions to stimulate demand. I expect to see demand pick up even though I have left price at the same, above industry high level. The reason behind this is because I want to see if consumers correlate price-quality association with the product. This will tell me how the consumers perceive the widget brand that the company manufactures compared to other similar widgets in the market.
Decision Period 11
What did you learn from last period's results?
In terms of distribution, based on pervious secondary data, it seems that since the company's product is a shopping good and hence a selective degree of distribution, the company is not a channel captain. Restrictions on increasing production exceeding 450 units has cost the company lost revenue for the past four periods. There is nothing I can do because it is computer based. The company is now in its 11th period and has never turned a profit. As of now, the company has debt of a little over four million.
What results do you expect from your current decisions?
Inventory is at its highest since period one. This has really concerned me because there is obviously something wrong. In addition, storage costs have escalated beyond a reasonable amount and has contributed to the majority of the total expenses. I have taken the necessary steps in order to move inventory such as pricing strategies and increasing the quality of the product. Looking into previous secondary data for other potential problems, I found pricing was right in line with the industry average, quality was well above average, gadgetry conforms to competitors, and everything seemed to be consistent compared the industry overall. However, the same cannot be said of consumer advertising and sales trade promotions, which really caught me off guard. The collected data showed that the company's budget well slightly below the industry average. Problem solved. The marketing budget will increase by $100,000.
Decision Period 12
What did you learn from last period's results?
For the first time in the history of the company, it has finally turned a profit totaling a little over four million. The market penetration strategy in the first few periods has paid off nicely at the expense of the company being at a financial loss at the end of each period. The strategy was very effective from a marketing standpoint. It appears that the consumers not only have brand recognition with the widget, but preference as well. Ending inventory are back to acceptable levels. Last period's storage expenses cost the company well over one million dollars, which I hope never happens again. Restrictions due to computer game issues and or conflicts continue to hinder the company's long-term growth. Something investors of the company don't want to hear.
What results do you expect from your current decisions?
To ensure the continuation of the company's current positive direction, I have increased the number of gadgetry by one, having a total of four. Product differentiation is very important in a homogenous market and that is why I improved quality last period and gadgetry this period. The reason for the slow progression of introducing new enhancements is to prolong the product life cycle. These chains of events are critical in the stability and success of the company as competitors continue to move aggressively into the market. I expect profits to increase by at lease twenty-five percent in comparison to this period and continue to do so over the periods that follow.
Decision Period 13
What did you learn from last period's results?
Pricing appears to be, within limits, very inelastic. For the most part, the company has been raising prices and demand has remained constant. Nevertheless, the reverse effect sees to be taking effect and the life cycle of the widget appears to be entering its maturity stage. Future decisions will have to be based on increasing gadgetry, quality, and marketing. All are elements of product differentiation and with good reason. I will not focus on pricing as much because competitors can easily match price. Overall, everything is running smoothly.
What results do you expect from your current decisions?
I have decided to raise prices in line with the industry high. In contrast to the increase in price, I have decreased the consumer advertising and trade sales promotions budget by 100,000. This was done for financial reasons, despite the profit gain at the end of last period. The game continues to refuse my request to increase production above 450 units. This, in turn, directly affects the company's ability to gain market share. For the majority of each ending period, demand has exceeded supply. This handicap has given other competitors a competitive advantage. There is not much I can do, but to just wait until next period to see if production limitations changes.
Decision Period 14
What did you learn from last period's results?
Units demanded were reduced by as much as thirty-five percent. Fifty-eight units were left in ending inventory, which tells me that last period's price increase proves to show that the widget is an elastic product. On the other hand, it could be because of the reduction of the marketing budget. In spite of the decline in demand, the company still managed to turn a profit, which is really good news considering the history of losses the company went through during its initial entry into the market.
What results do you expect from your current decisions?
After analyzing the secondary data from previous periods, I have decided to just increase the advertising budget by 50,000 and leave the price of the widget alone for the time being. I did take into consideration, however, using the market penetration strategy, but profits would have been heavily impacted. Besides, the company cannot produce enough units to meet consumer demand above 450 due to restrictions set by the game. In light of the fact that there is only two more periods left, I have taken upon myself to maximize the company's profits, but still keeping all of the policies that I have put into effect since the first period. No employees will be laid off, nor will the advertising budget fall below their set amounts.
Decision Period 15
What did you learn from last period's results?
The increase in consumer advertising and sales trade promotions really made a difference in terms of stimulating demand. Total units demanded nearly doubled from last period's and ending inventory this period, I am happy to report, is zero. Moreover, profits have just about doubled as well in comparison to last period's results. According to the secondary data that has been accumulating over the periods, there has been a lot of consolidation in the market of widget manufacturing. At the beginning of period one, there were a total of fourteen. Now it appears that three have either gotten bought out, merged, or left the market completely.
What results do you expect from your current decisions?
For this period, I decided to decrease the unit price by one to ensure that there will be no ending inventory at the end of next period. I figured that by passing the savings onto the consumer, the company would also benefit by not having to pay for holding costs if there should happen to be any ending inventory. Although profits have doubled for two consecutive periods, I don't expect this trend to continue due to not being able to meet consumer demand. However, profits will be substantial by as much as twenty-five percent.
Decision Period 16
What did you learn from last period's results?
Everything has worked out according to plan. Profits have increased by twenty-five percent over last period's results and ending inventory is zero. The ups and downs that the company has been though, since its conception, really reflects how it has grown. From a reporting a net loss of over five million in the beginning periods to a net profit of almost fifteen million in period sixteen. Through the application of marketing and its many elements, the continuing growth potential of this company is extraordinarily encouraging. I am very happy with the way things turned out and actually applying what I have learned in class has make this a extremely positive experience.
What results do you expect from your current decisions?
N/A
