What are the strengths of your strategy, What are the challenges, What drives profits? Create a SWOT analysis of your Porter’s Strategy.
What drives profits?
First please review Porter’s Strategies: https://www.mindtools.com/pages/article/newSTR_82.htm
1) What Porter’s strategy will you use and why?
For our purposes there are four Porter’s strategies:
Broad Cost Leader
Focused Cost Leader
Niche (Focused) Differentiation
Cost means you beat the competition on prices, Differentiation means you beat them on being a better/different/superior product and you charge more. For CapSim broad means low and high tech markets. Focused means you dominate low or high tech markets.
Think about yourself as consumer and entrepreneur and what Porter’s strategy makes the most immediate sense to you. Would you rather own a franchise with exact standardization of McDonald’s or an expensive but wonderful unique Bistro? If you were to start a business would it sell in tremendous volume or focus on top quality? Don’t go out of your comfort zone just because you think “hey I need more challenges!”. There are challenges enough so it really helps if you understand the specific Porter’s strategy as a consumer or from your business experience.
2) What are the strengths of your strategy? What are the challenges? What drives profits? Create a SWOT analysis of your Porter’s Strategy. Some examples of Capsim “Secret”s you can find by reading the Reports:
Low Tech is a bigger market than High Tech for the first three rounds but gradually shifts to more High Tech buyers.
High Tech is willing to pay more per unit.
At the start, High and Low Tech consumer perceptions are not that different but grow apart rapidly.
It takes more time in R&D to create quality.
Differentiators must tweak specifications for size and performance each round, and release new products more often.
Cost Leaders need to sell in volume, with a price point that beats the competition but does not erase their contribution margin.
3) What immediate actions in CapSim will you need to focus on to implement this strategy? How are you going to capitalize your strategy? The key mechanism for implementing a Porter’s strategy in CapSim is through Product Releases. Describe your first new product that is aligned with your strategy.
Make sure to invest enough early in the game (Stocks and Bonds) while you have a favorable interest rate in ways that will jump-start your company and get a positive ROI. Remember long term debt is paid in 10 rounds, you play 8 rounds. Long term debt is necessary for growth. Invest wisely – where you put the money, the decisions in CapSim need to be aligned to strategy, so you can compete based on quality or on lowest cost.
4) What will you need to focus on in the longer term? Will you need more product releases?
Every week you’ll be using the same strategy – every week name your Porter’s Strategy in the debriefing.