Making decisions in business is one of the most crucial things. This is because it dictates the direction of the business relative to the market and concerning corporate objectives. In the cycling industry that the business simulated operates in, innovation and creativity are some of the most important things. More people are becoming more open to flexible concepts of bicycles, and that is an indication of the simulated world. While most segments in the industry are associated with specificity, recreation is the most crucial segment. This assignment reflects on the business decisions and marketing choices made during the simulation. (Wellington et al., 2017).
The essay covers the issues about the competitive environment during the simulation, marketing decisions, and recommendations on the direction a new management team should take to make changes to the situation at the end of the simulation.
Competitive Environment Analysis
At the beginning of the simulation, all businesses in the industry were provided with the same dataset and parameters. From the environment at the beginning, I think it is clear recreation would attract the highest numbers of any other segment. Unless operating in a niche market, it is always wise to start with an approach favoring a higher market share in the following periods (Akbar et al., 2017).
All customers in all segments were aligned with the need for style, lightweight products, navigation assistance, status symbols, and bicycles that rejuvenated their youth. Speed is the priciest segment because of the need for superior aerodynamics, lightweight, and built from modern sustainable raw materials. Most customers preferred to have products that were exercises and those that were adventurous. I think the best decision for the first quarter was to ensure that the business was customer-centric.
As one of the industry leaders, it was a step back for the business to prioritize just one of the three market segments. A robust approach should have classified priority levels for the three segments instead of just one and leaving the other two as not a priority. The cost of a quarterly lease (54,000) for the chosen city (Amsterdam) is also reasonable for market entry. Recreation and speed are the main segments that flourish in that market. However, the mountain segment has a significant market in the city. Leaving out the other two as not priorities was an opportunity for competitors to capitalize on. It allowed competitors to take the segment’s market share from under its nose in a location where the business is located.
In the second quarter, the parameters and variables remained largely unchanged as all the businesses focused on producing products as per their initial strategy. Things get interesting in the third quarter because the location of the business is very competitive. Capacity Bikes were the first to identify an opportunity in the craze and focused on marketing its brand and products, and there were returns for the same. Amsterdam already had three businesses in the industry, and that meant that a slight slip would be hard to come back from due to competition. Extreme Bikes, which is based in Rio de Janeiro, where it has no competition and on a lower quarterly lease cost, had more inserts than 3D CYCLES.
The third quarter had some interesting results because most businesses were establishing a niche for themselves. The market share for recreation bicycles was the only one with anything that resembled normal competitive distribution. Extreme Bikes were clear giants on the market for mountain bikes and boLt being a specialist in speed and high-performance bicycles. At this point, entry into a new market would have been an ideal move for the fourth quarter. The first one to adopt this strategy was Extreme Bikes, which entered the recreation segment. The efforts were successful as they increased its share in the domain from 8% to 36%.
In the fifth quarter, 3D CYCLES and Extreme Bikes also followed the same strategy and effectively increased their market shares in other segments. The Mountain and Speed segments were in a good place because there was competition. Therefore, customers would get products that are superior to the ones they received before. Businesses penetrated new markets during this quarter to a point where each business had representation in every segment. 3D CYCLES is the only business that seemed to have adopted this strategy late because it still lagged in the two other market segments.
The late entry into new markets meant that 3D CYCLES would have better references for an effective and efficient market entry. It is shown in the market shares for the sixth quarter as it had more than a third of the market share in two of the three segments. Extreme Bikes shifted its specialization from the Mountain segment to Speed and Recreation. Recreation was still the most competitive of the three segments, with each of the five businesses having more than 10% market share. 3D CYCLES dominated in the Speed segment, and boLt’s dominance was in the Mountain segment. The two companies had about a quarter of the market share in the Recreation segment, making them the biggest entities by market share in quarter 7.
Based on the results of the seventh quarter, the two businesses ranked first and second in market share should focus on business process improvement. Having a ready market allows them to produce in quantities that facilitate exploiting economies of scale. Automation and innovation would be ideal for integrating into 3D CYCLES and boLt. It specifically improves product quality standards, reduces risks, and increases profits. While at it, 3D CYCLES should explore options of how to best improve in the Mountain segment. I think Capacity Bikes can focus on specializing in the Mountain segment where it has the best performance. Liberate needs a strategic revamp because it has very little market share, less than 13% in all three segments.
Marketing Mix Decisions
The concept of the marketing mix is coined from the standard marketing objectives of any marketing endeavor. In this section, I reflect on the marketing mix of the businesses involved in the simulations. The four main tenets of marketing for the simulation revolved around the model of the 4Ps Marketing Mix. The four marketing tools that are considered in this reflection are place, promotion, product, and price (Thabit & Raewf, 2018). The tenets dictate the production, improving and standardizing the relationship between producers and consumers.
4Ps Marketing Mix
The three product segments are priced differently, with the basis being the performance and comfort of a bicycle. Customers are willing to pay 900 for the Recreation segment while they can pay 1,120 for the Speed segment. 1,300 is the amount that consumers are willing to pay for a product in the Speed segment due to its need for high quality and performance and parts. At the beginning of quarter 1, customers who are willing to pay for a product in the Mountain segment are an enticing bit. I chose to find more customers. More customers want to buy at prices of the Recreation segment because it is affordable.
Every segment has elements that dictate how bicycles are priced. My strategy when the simulation started was to prioritize the Recreation segment and serve its customers. The segment was also the biggest in the industry; thus, controlling it meant controlling a larger share. With a 21% market share in the Recreation segment, I was certain the same strategy could be expanded in the fourth quarter. I opted to observe the markets and make informed decisions in the fourth quarter. Success inferred from Extreme Bikes’ market share in the Recreation segment where it entered was evidence than opportunities in the other segments.
I was reluctant to jump ship, and this decision worked against me in quarter four because the other two companies had crept into the Recreation segment. The introduction of Capacity Bikes and Extreme Bikes in the segment meant that competition even became stiffer. In this quarter, I have less than 10% of the overall market share, which is a drop. The Speed segment was one of the most lucrative in terms of price per unit that customers were willing to pay, 1,300. I opted to grow in that segment because it was not fully explored. It is also the segment that customers are willing to pay a higher price for lighter, easily controllable, and high-performance bicycles (Lahtinen et al., 2020). The move was entirely inspired by the initial push for more revenue and an increase in market share in other segments.
Afterward, an increase in market share also requires an increase in production. The rate of production for the business was required to be increased to support the increased demand. 3D CYCLES was now in an optimized position in the fifth quarter when the business started going forward. The business identified opportunities in the Speed segment and ventured to achieve them. The main one was increasing the revenue faster by using the higher prices that customers were willing to spend on products in the segment. The increased profit margins were crucial in dictating my next step, where it was about taking steps to market products in the new segments to customers.
The business already has a shop in Amsterdam, and operations from it are going on well, but there is a market in which it was trailing in the sixth quarter. It was only vital that I worked on improving on promotions. Most of my decisions were based on the segments the business was doing well in. There has been a clear lag behind in the Mountain bicycles segment. Improving in that segment will require the business to venture into the Rio de Janeiro market, where the demand for products for the Mountain segment is high. boLt runs as one of the most efficient businesses in the simulation because it uses an aggressive marketing strategy. From the simulation records, it had 32 ad inserts.
Having run a few ad inserts and campaigns, the business can be improved in many ways with marketing on of them. Entry to new markets should be predicted early based on decisions in the previous rounds. Evaluation of the operating environment is also crucial for both as it allows the business decisions to be made relative to the market. It would also bolster competitive pricing when the business operates in a segment where it has a higher market share (Al-Surmi et al., 2020). More market share equals more customers and, therefore, an allowance to enjoy economies of scale.
The challenge I had during the simulation was accuracy in predicting the market more until the decisions had been made. The use of economies of scale to significantly reduce the cost of production will lead to an increase in profit margins. 3D CYCLES can give discounts on select products to increase sales appreciate the customers. The approach allows me to price products effectively because accurate predictions of market conditions are based on the evaluation done. At the end of the simulation, my business had a significant market share in the industry, and there was still an avenue with more opportunities in the Mountain segment.
Direction for New Management Team
Businesses can be perpetuated in a structured manner when leadership terms expire. It is common to find this happening in well-established businesses where the perpetuity is planned for in advance (Osita et al., 2020). In 3D CYCLES, we are committed to serving the customers with high quality of the raw materials selected for our products. The business needs to be adopting innovation to manage resources more carefully. In the seven quarters of simulation, the business established core and supporting sections. The core is made up of products that are high quality and with appealing physical looks and comfort.
The next management should focus on harmonizing the value chain and improving the supply chain. These will be elements of improving the tools and equipment used in production. Aspects like automation and leveraging technology in production management for quality are ideal for the business going forward. It helps reduce errors and increases productivity while the overall efficiency is also improved. The new management team should look to also expand to new markets by opening more locations. The knowledge gained from the simulation is vital in dictating the future of the business. Lessons learned and efficient approaches should be adopted as best practices.
Opening locations in low-cost areas will help reduce the business’s expenditure in leases and facility fees. It is also a clear sign of growth which shows the business is credible and that the reputation and market share are protected by all legal means (HR & Aithal, 2020). Rio de Janeiro is a good location, and the quarterly lease is also non-expensive. More importantly, there is only one competitor in that region, unlike Amsterdam, where three businesses are located. Improving the prices can be done in more ways than just reducing them; bonuses and discounts would be a great way to make prices competitive. Bundling products in the Recreation segment in packages that the customers purchase. while selling to customers
The simulation was a success and an insightful experience for everyone that participated in it. From the starting variables for all five businesses, it is clear that businesses cannot be done in the same way. There are still going to be differences even if the environment and the decision-maker are the same because the response or context will always differ. The businesses competing with 3D CYCLES took a more general approach of increasing the overall market share. The next step is improving in products and specializing in a niche.
A niche makes for a good strategy that has a core and radial channels that can be followed for growth. In this simulation, the process is captured in seven quarters, but there is room for more. The general level of the simulation is that the business has outgrown its original goals. It is now looking to grow further with new goals and objectives.
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