The

GLO BUS

Simulation
Assessment Report
of

Company A
by the member of

Michael Hicks
on the date of

11/25/2014

Slogan:
We want to provide our global customers cameras that are as memorable, and as uniquely
remarkable as the moments they capture.

Table of Contents:

Executive

Summary________________________________________________________________________

Strategic

Approach_________________________________________________________________________

Performance

Analysis________________________________________________________________________9

Conclusion_________________________________________________________________________________

_____13

Appendix

A______________________________________________________________________________________14

To provide an adequate understanding of this strategic

assessment it is appropriate for this report to include a proper
definition of the simulation experiment A Team was involved in.
GLO-BUS is a computer-based exercise modeled to reflect the
real-world character of the globally competitive digital camera
industry in which you run a company in head-to-head competition
against companies run by other class members. 1

Executive Summary
Company As strategic operations, in summation, can be described as a broad
differentiated strategy2 that applied strategic decisions consistent with this
approach throughout the simulation process. This strategy can be seen in the
companys vision: A-Teams main drive is to provide higher quality and higher
performing cameras to the industrys market. We will thrive by investing in strategic
components that will increase value to all of our partners, maximizing the return for
our stakeholders, creating a productive yet safe and healthy atmosphere for our
labor force, innovation through our R&D department, and delivering a higher
performing and higher quality camera to the market. 3

A Team targeted and delivered high performance and high quality cameras to
value-conscience consumers who have a desire for luxury, image, and
performance. The company acquiesced to this strategy to achieve greater
profit margins, obtain positive brand image, and, in regards to a broader
scale, to achieve greater market share, while satisfying a higher ended

market demand.
As a company at the beginning of the simulation, Team A started out on year
5 (SY5: Simulation year 5) with the other companies in the classs industry on
total equal footing in regards to financial performance. 4 At the end of the
simulation at year 13, Team A achieved 2nd place in Industry 3 as overall best
company meeting/exceeding investor expectations on the simulation game to
date scoreboard.

Revenue and Profit Margins Earned from Entry Level and Multi Featured Cameras Throughout the Simulation13
Net Revenue

Net Profit

$500,000.00

20%

$400,000.00

15%

$300,000.00
Sales Revenue ($)

10% Profit (%)

$200,000.00

5%

$100,000.00
$-

4 5 6 7 8 9 10 11 12 13 14

0%

Time (Years)

Strategic Approach
The basis of these principles translated into a strategy over the course of the
simulation gave A Team the edge on competition and are the principles the
company attributes its success. The way this strategy translated into the
implementation of the companys differentiated decisions were primarily in regards
to the higher p/q rating, longer warranty periods, larger volume of retail dealers,
more models, lucrative compensation, involved corporate responsibility, larger
investment in innovation, and the added value turned into higher priced cameras
for both the entry-level and multi featured models. In this implementation of
company decisions, it is easy to see a broad differentiated strategy and A Team
stayed roughly consistent with these implementations throughout the simulation
years which provided success in meeting investor expectations and obtaining
corporate strategic and financial objectives. A Team pursued the same strategy for
both cameras and in all available markets so that the predictability of market
change and the implementation of strategy to meet objectives were easier to
manage and therefore less complex for the company to over complicate. Some
5

major market forces that affected the intensity of rivalry between companies in the
industry were price, p/q ratings, and customer demand 5.
Year 6 was an important year for A Team to consider that this year did not
determine the success of the companys future nor did it determine the industrys
leader. The year played a role in helping A Team understand the market more. In
this year, A Team understood what the general competition was delivering to the
market and what type of strategies the competitors committed to. As the years
continued, the company gained more and more understanding of the competitors
they were engaged with. Company A was one of the two only broad differentiated
companies in the industry and Company B was the lone low cost leader out of 10
companies which set the stage for the rest of the simulation as far as the
consistency of strategic development and decision making.
In years 7 and 8, A Team led the industry as the market leader. An important
note is that from year 8 on to the end of the simulation A Team remained debt free.
The reason for the debt payoff was so that the credit rating would remain far above
the boards expectations as well as not having to pay interest and tax incentives.
The strategy for A Team remained consistent as the company entered into as many
retail dealers as possible through out each of the regions of the global market to
broaden market share and thicken sales revenue. In year 7 the team decided to
increase the investment in Tech Support to provide more value to the customer and
provided more models to choose from to provide the sub segments within the target
market more value to increase market share and therefore sales. During these two
years, A Teams weaknesses only consisted of price. The companys competitive
strengths, compared to the competition, were exceeding. Every decision point on
the product design and marketing side of business, other than price, was A Teams
competitive strength in relation to the industry. This type of implementation of
6

strategy could be seen as an offensive strategic move because the intention of the
strategy was to win market share.

Revenue and Profit Margins Earned from Entry Level and Multi Featured Cameras Throughout the Simulation

Net Revenue

Net Profit

$500,000.00

20%

$400,000.00

15%

$300,000.00

10%

Sales Revenue ($) $200,000.00

$100,000.00
$-

5%
5 7 9 11 13
4 6 8 10 12 14

Profit (%)

0%

Time (Years)

In the beginning of year 9, A Team adopted a poor decision that changed

the course of strategy for the following two years. A Team decided to embark upon
raising the P/Q ratings and prices for the entry level camera for the notion of greater
profit margins of entry level cameras, during the major trend of industry wide
lowering of prices. This mistake cost A Team a sales reduction of 30%. These
reduced sales turned into an explosion of market share for Company F and
positioned them as the industry leader. The false projected trend for year 9 was a
continued increase in prices and a continued increase in P/Q ratings; however,
actual year 9 resulted in, not increasing prices, but a sharp decrease in prices. This
sudden declination of prices and the companys decision to increase prices and P/Q
ratings made A Teams weakness highly exposed and therefore it was only natural
to see market share decrease and sales diminish during year nine.

Entry-Level14
Net Revenue

Net Profit

$15.00
$10.00

Sales Revenue ($)

20.0%
15.0%
10.0%

$5.00
$-

5.0%

Profit (%)

0.0%

Time (Years)

In year 10, A team resolved the issue out of reaction of the misguided
projections the company made by drastically making provisions for the reduction of
prices by decreasing investment in R&D, CSR, and Advertising to gain back more
market share because of the price sensitivity trend and price war threat. Although
this worked to a certain degree, to have strengthened the resolution, A Team
shouldve reduced investment in product design qualities instead of the decisions
chosen to provide for a means to reduce prices. Either way, the strategic decisions
of reduction in prices put A Team in a better position financially and the company
made the largest comeback of the simulation game according to the Leap Frog
Award16. All the while this year represented the year of increased rivalry among
companies due to market saturation and various other causes that slowed growth
for all companies.
Years 11 and 12 provided no anomalies for A Team to consider as
devastating market effects that hindered the success and continued growth of sales
and profits resulted from the strategic decisions made in year 10. The company
decided to continue reducing prices for the entry level cameras while leaving the
Multi Featured Cameras price the same. A Team decreased the investment of R&D
8

for entry level cameras, Advertising, and Design Components of the entry level
cameras leaving the models at a minimal 4 star rating to keep the price trending
down. By year 12, the R&D investments for both multi featured and entry level
were reduced more as well as prices for the cameras incrementally. This was a
defensive move to reduce the risk of loss of market share and sales of price
sensitive consumers to ensure continued growth for A Team to the end of the
simulation.

Entry-Level14
Net Revenue

Net Profit

$12.00

20.0%

$10.00

15.0%

$8.00

Sales Revenue ($)

$6.00

10.0%

$4.00

5.0%

$2.00
$-

10

Time (Years)

10

11

12

13

14

0.0%

Profit (%)

Multi-Feature17
Net Revenue

Net Profit

$12.00

20.0%

$10.00

15.0%

$8.00

Sales Revenue ($)

$6.00

10.0%

$4.00

5.0%

$2.00
$-

10

Time (Years)

11

11

12

13

14

0.0%

Profit (%)

Performance Analysis
To put the results into a frame of context, it is necessary to show A Teams
performance charts from years 5 to 13 inside each performance metric section. The
graphs are formatted by bars resembling the year to unit of measure. The investors
expectations12 can be seen as the small dots within the bars to identify a standard
of meeting those expectations. From top to bottom: Sales Revenue 6, EPS7, ROE8,
Stock Price9, Credit Rating10, and Image Rating11.
EPS: Earnings per share (EPS) equal net profit divided by the number of shares of
common stock outstanding at the end of the report year. 23 The reason why this
metric is a good measure of performance is realized through its direct relation to net
income. Higher EPS values indicate the company is earning more net income per
share of stock outstanding. The expectations of the board of directors are to grow
earnings per share (EPS) at least 8% annually through Year 10 and at least 4%
annually thereafter12. In years 5-8, A Team gradually increased Net Income and
exceeded board expectations of EPS by 16% 17, 18.8%18, and 8.7%19 consecutively
from years 6 to 8. As seen in the strategic approach section of this report in year 9,
the company mistakenly assumed the forecast of market trends and the result was
missing the mark in regards to EPS expectations and corporate objectives. In year
9, Company A saw a 70%20 negative change in EPS, while the expectation was an
8% growth. That is a 62% deviation from expected performance. In years 11, A
Team missed the mark by 5%21. In years 12 and 13, A Team exceeded expectations
by 31%22 and nearly 50% in year 13.

12

ROE: Return on equity (ROE) is defined as net income (or net profit) divided by
total shareholders equity investment in the business. 23 The greater the percentage
the more the company is earning profit per dollar of equity that the shareholders
own of the business. This measure resembles the EPS metric because this too is a
direct measure of profitability. The expectations of the board of directors are to
maintain a return on equity investment (ROE) of 15% or more annually 12. The results
reflect the EPS results throughout the simulation years.

Stock Price: The stock price is the highest amount someone is willing to pay for
the stock, or the lowest amount that it can be bought for. The stock price is a good
growth potential indicator as well as how confident others are in future business.
The expectations of the board of directors in regards to the stock price are to
achieve stock price gains averaging 8% annually through Year 10 and 4% annually
thereafter12. A similar trend can be seen from the chart showing the stock price of A
Team from years 5 to years 13.

13

Debt rating: The Companys credit rating is a function of four factors 26: (1) The
debt equity ratio25- which is defined as long-term debt divided by total shareholders
equity and indicates the extent to which the companys long term capital has been
supplied by creditors or by shareholders. There are only 4 measures of the debt
equity ratio Company A has accounted for in years 5, 6, 7, and years 8 through 13
are accounted for as one measure. In year 6 A Team had 18:82 debt to equity, in
year 7; 4:96, and in years 8 to 13 A Team was debt free with a 0:100 debt to equity
ratio27.
(2) Times Interest Earned Ratio25- which is defined as operating profit divided by
annual interest payments and is a measure of the safety margin that creditors have
in assuring that company profits from operations are sufficiently high to cover
annual interest payments. Company As Times interest earned was 16.86x, 32.5x,
and 99.99x for years 6, 7, and 8 through 13 consecutively 27.
(3) The percentage of line of credit used25. In year 6, A Team used 34% credit to
finance operations. In year 7, the company used 20%. In year 8, Company A used
3%. In the succeeding years, A Team used no line of credit 27.
(4) The amount of years it will take to pay off the companys outstanding loans 25
based on the most recent years free cash flow. The number of years it takes to pay
back outstanding loans is equal to loans outstanding divided by free cash flow 26.
For years 6, 7, 8, and 9 through 13, the debt payoff capability was 1.4 years, .07
14

years, .1 years, and 0 years consecutively. The overall credit rating, as seen below
in the chart, were B+ in year 5, A- in year 6, A in year 7, and A+ in years 8 through
13. A Team met and exceeded the expectations of the board of directors throughout
the simulation as the expectations were to maintain a B+ or higher credit rating.

Image Rating: The image rating is comprised of a total of 11 factors 26, but to
generalize, it is easier to categorize them into 3 factors: P/Q ratings, Market Share,
and Corporate Social Responsibility. In year 6, company A maintained the
expectation of an image rating of 70. In year 7, the company achieved the
surpassing score of 82, then 87 in year 8. In year 9, due to a decrease in market
share, the image rating dropped to 77. Then, the image rating grew steadily to 89
in year 12 and to 95 in year 13. Our market share shows very similar trends
throughout the simulation28. In years 11 through 13, A Team invested more into CSR
and that could be the explanation of the gradual growth. A Team met the board of
expectations for all the simulation years for the expectations in regards to Image
Rating were to achieve an image rating of 70 or higher.

15

Conclusion
In conclusion, A Teams strategy succeeded. The companys investor
expectation score ended with 115; Best-In-Industry score ended with 89; Game-to
Date score with 102. The way that these scores are calculated helps to understand
that the strategy implemented was a strategy that went beyond requirements and
supplemented and sustained a fierce competitive edge. The company ended 2 nd in
the industry based on overall score. Below are the Companies objectives 29 made by
the managers towards the beginning of the simulation:
-Financial: Always remain in positive cash flow year after year; increase net
profit by 100% in next five years; uphold all investor expectations year after year;
acquire an A+ credit rating within five years; increase ROE by 25% yearly; increase
net profit by 20% yearly.
-Strategic: Keep increasing investment in R&D; make more models in 2 to 4
years time; obtain and maintain at least a 14% market share for both cameras
yearly; lure in talent and increase productivity by 5% yearly; diminish warranty
claims.
The way this strategy translated into the implementation of the companys
differentiated decisions to meet the financial and strategic objectives:

Higher p/q rating

Longer warranty periods
Larger volume of retail dealers
More models
Lucrative compensation and incentives
Involved corporate responsibility
Larger investment in innovation

16

These decisions contributed to the successful execution of a differentiated

strategy that for the majority of the simulation met the objectives purposed by the
managers and the expectations of the board of directors.

17

Appendix A:

References :

References:
1. GLO_BUS Participants Guide- How the GLO-BUS Exercise Works (pg.1)
2. Crafting and Executing Strategy, 19 Ed, by Thompson, Peteraf, Gamble,
Strickland. McGraw-Hill Irwin (ISBN-978-0-07-753707-4). (pg. 129 Broad
Differentiated Strategies).
3. Taken from Team As Class Preparatory Assignment (CPA #2) on Corporate
Vision, Mission, and Strategy.
4. GLO_BUS Participants Guide- What Your Board of Directors Expect (pg.23)
5. Taken from Team As Class Preparatory Assignment (CPA #3) on External
Factors.
6. Performance Charts taken after year 12: Sales Revenue Graph
7. Performance Charts taken after year 12: Earnings per Share Graph
8. Performance Charts taken after year 12: Return on Equity Graph
9. Performance Charts taken after year 12: Stock Prices Graph
10. Performance Charts taken after year 12: Credit Rating Graph
11. Performance Charts taken after year 12: Image Rating Graph
12. GLO_BUS Participants Guide- What Your Board of Directors Expect (pg.23)
13. Dual Score Chart of the companys overall results throughout the simulation
years (1-13).
14. Entry Level Chart showing the relation of profit and sales through SY12 from
A Team Scorecard from year 12
15. Industry Market Entry Level Trends chart taken from the industry overview
portion of the Statistical Review
16. Leap Frog Award for most improved overall score found in the bonus point
award section of the statistical review
17. EPS taken from score card for year 6 in the key metrics table
18. EPS taken from score card for year 7 in the key metrics table
19. EPS taken from score card for year 8 in the key metrics table
20. EPS taken from score card for year 9 in the key metrics table
21. EPS taken from score card for year 11 in the key metrics table
22. EPS taken from score card for year 12 in the key metrics table
23. Financial Ratios Used in GLO-BUS on profitability ratios.( pg.1)
24. Financial Ratios Used in GLO-BUS on profitability ratios.( pg.1)
25. Financial Ratios Used in GLO-BUS on credit rating ratios. (pg.4)
26. GLO_BUS Participants Guide- Finance Decisions(pg.20)
27. Comparative Financials in Statistical Review: Balance Sheet Data
28. Company Performance Review on page 3 of the Statistical Review
29. Taken from Team As Class Preparatory Assignment (CPA #2) on Corporate
Vision, Mission, and Strategy.

18

Personal Assessment (bonus):

In the simulation process, the way that I contributed in the management of

the companys strategy can be seen in the decision making, market analysis, and
strategy construction for the company. During the construction of the strategy, I
categorized the strategies and explained the pros and cons of each for better
understanding of the strategies in relation to the simulation game and offered the
suggestion that we pursue a best-value strategy. This option was turned down by
majority and I gratefully pursued a differentiated strategy with Markus and Joshua. I
lead the decision making in PY7, by which that lone year we ranked 1 st in the
practice round. This was the main reason why Markus and Joshua wanted to pursue
a differentiated strategy.
Before the simulation process began, I read and kept up with most of all the
material, including the entire participants guide, most of the help guides, and most
of the videos, as well as manipulated the simulation for a couple of hours before
practice round decision making to ensure my helpfulness and productivity for the
team. Every other day after the simulation began, for about 30 minutes to an hour, I
looked at where the company was in regards to competition and in comparison to
board of directors expectation. I was always prepared for meeting with the group
whether on the phone or in the computer lab. I missed one meeting because I was
traveling out of town and without reception, though I was still prepared if I were to
have reception at the time. The reason for my high involvement is because I am
very competitive and I love to conceptualize what I am doing before I do it.
I was surprised at how one basic decision could change the entire course for
a companys success in an intense competitive environment. The critical thinking
involved in a decision was realized as much more vital. I also was surprised at how
important it is to have sufficient knowledge. Without detail knowledge about what is
going on in the market you would lose this game, and I am sure that is also the case
for the real world.
This experience has matured my mind in preparation for the business career.
I have drawn from other classes the material that has all been subsumed into this
over aching category of business strategy. This simulation and class has helped me
conceptualize and consolidate the knowledge that I have obtained in my previous
courses. This has prepared me for working in the industry because now I can
articulate and communicate in a more meaningful fashion and solve problems in a
more efficient and effective manner because of the understanding I have now.
19