Business Concepts Used in the Simulation Exercise

Business Concepts Used in the Simulation Exercise

The concepts covered in the BUAD 453 class



Focus low-cost strategy

Ideas Covered in other courses

Produce to demand

Total Productive Maintenance

Definition of the Concepts

The VRIO (Valuable-Rare-Imitable-Organization) is an analytical tool used by managers to examine the source of a competitive advantage by examining the microenvironment of an organization. The SWOT (Strength-Weakness-Opportunity-Threats) tool is a situational analysis technique used to determine the internal and external environment an organization by analyzing the strengths, weaknesses opportunities and advantages. Focus Low-Cost Strategy is a pricing approach where a firm gains market and stimulates demand by offering products or services at a relatively low price. Produce to demand is a supply chain strategy where an organization is keen to detect, request and safeguard inventory using small stalks of final commodities; hence, a firm ensures that the production is as close to the time and the required item as possible.

Total Product Maintenance (TPM) is the process of achieving a machine’s perfect output by incorporating equipment maintenance into the manufacturing process and thus enhance the production capability of the equipment.
The Reason for Using the Concepts

To determine the suitable business strategy that the company must use in the new market a situational analysis was conducted using the SWOT equipment.  Accordingly, the tool enabled the organization to capitalize on strengths, reduce probable adverse effects of weaknesses, utilize opportunities and minimize the impact of threats. The VRIO tool was used to examine the company’s financial, human, material and non-material resources, and thus determine the competitive advantage of the firm. The low-cost strategy was used to gain access to the highly competitive market and stimulate demand. The produce to demand concept was used to scale up the production capacity and minimize costs by linking the application with production. The TPM was used to enable the firm to determine whether it was necessary to increase capacity.

Application of the Concepts in the Simulation

The SWOT tool was used to analyze whether the company had all the resources required to realize its objective. Determine the target market is the main strength of the firm that enables it to identify expansion opportunities once the current customer base is saturated or the production capacity increases. The VROI was used to determine the source of the company’s competitive edge. Human resource is the resource for the company’s competitive advantage. Notably, by employing qualified personnel, the company can produce distinct and rare products that cannot be easily imitated and utilize funds efficiently. The company has analyzed demand in the market and realized that in the second quarter only purchase 315 units. However, its in-house facility can produce about 1040 units. Therefore, the company can quickly meet customer’s needs in the second quarter using the produce-to-order concept. The company divides its four brands into two categories: premium and standard; however, items in the standard cluster are sold using the low price strategy. According, the company sells brands in the standard category at $150 below the price that customers are willing to pay. In turn, the company can recapture value through profits and simultaneously maintain its marketing positions as a low-cost company. The TPM was used to integrate printer maintaining into the production process. The two printers at the company’s disposal can produce 520 units each per quarter, and the company expects to sell 315 units. Therefore, through TPM the capability of the printers was maintained by ensuring that the machines were not overworked.