State of the Industry: The sensor industry is an attractive industry due to its’ rapid growth rates and high entry barriers. Additionally, there are no close substitute products. The bargaining power of suppliers is not a factor affecting the sensor industry at this time. However, the bargaining power of buyers is extremely strong, due to the fact that switching costs are low, and most product segments are fairly standardized. The sensor industry is also characterized by intense rivalry among six strong competitors. State of the Company:
Chester Sensor Corporation is in a good competitive position at the end of the seventh year of operations. Market share, profits, and stock price have all increased. There were some bumps in years three, four, and five, due to heavy spending on production expansion and automation increases. Chester has also made substantial investment in research and development. These improvements were driven by the corporation’s initial goals of having a state of the art manufacturing facility and superior product lines. Future Outlook: The future outlook for Chester is excellent.
The biggest opportunity facing our corporation is the rapid industry growth. The factory currently has in place, the infrastructure, trained labor, and quality processes, to take advantage of this expected growth. Another opportunity for Chester will be growth from continued segment differentiation. Chester has primarily focused research and development on the High End, Performance, and Size, product segments. Two competitors have dropped out of each these segments, making it possible for Chester to realize gains in these markets.
The threats facing Chester come from the stiff competition of strong industry rivals. These robust rivals will challenge our company to keep its’ competitive business processes at the most efficient levels. To maintain market share gains, Chester will need to fine tune sales and marketing and continue to invest in research and development. In order to increase profits, Chester will continue to develop cost saving measures in the production processes. Summary The key determinant of Chester’s’ success was the management commitment to superior business processes.
Chester has a state of the art facility. Management increased capacity in the years after the government split and will continue to add capacity as growth dictates. However, capacity will be expanded at a lower rate than previously, in an attempt to avoid cash flow shortages seen in prior years. Chester has enhanced automation and quality processes in order to gain production efficiencies and cost savings. Chester has invested in labor recruiting and training; developing core competencies in it’s’ workforce.
The firm has and will continue to maintain investment in research and development, as product improvements will continue to be demanded by the customers. The other key factor of the corporation’s success was the superior growth of the industry. It would have been much more difficult to sustain profitable growth in this extremely competitive market without the superior volume growth of the sensor industry. Future managers of Chester should continue plant improvements and labor initiatives, while focusing on product segments with the highest contribution margins.
Management needs to develop accurate forecasting techniques to avoid the inventory swings seen in the first five years, and the inventory stock outs that occurred for at least one product every year. Future success will depend on leveraging the core competencies of Chester and the accurate analysis of competitor’s actions and direction, due to the strong competitive rivalry of the industry. We learned from the Capsim Management Simulation that even if you put all the correct cost efficient business processes into your business, you may not be successful.
It is not enough to plan for an individual department; managers need to understand how all the departments are interrelated to form a whole. Managers need to understand how their firm fits into the competitive environment. You need to know what your buyers value and what your competitors are doing to provide that value. We improved our strategic management skills by learning to analyze the competitive environment, looking at the big picture. We learned success depends on building your firms’ strengths and understanding the competitive environment in which your business operates.