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MOD003337 | Business Strategy | Report | BIOMAS 5 business

Question :

This assessment will cover certain questions which are like:

  • What are the effective projected Y16 performance in BIOMASS.
  • What are the strategies for BSG Simulations.
  • Gave the concepts in relation to strategies and ideas of approaches.
Answer :

INTRODUCTION

Long term business decision-making is a terminology involving determinations on the long-term as well as short-term strategy of the firm (Johnson, 2016). This is a course by which the business is planning its plans for the future and taking efficient choices in the particular time to reach that goal. Those decisions are consistent with the firm's long-term goals and purpose, which demonstrate the corporation's overall picture. When taking these decisions, companies are taking short-term goals along with the long-term goals into the vision and mission statement of both the picture business. To recognize the essentialness of different strategic structures needed to assist the strategy of the business, the London-based BIOMAS 5 business. This report includes the comprehensive business data needed during the strategic planning process. The report also describes the collective decisions that businesses require when practicing Business Strategy Simulation Game. It also describes the different strategy and leadership frameworks used only to help the flexible approach of the organization.

The Business Strategy Game is by far the most commonly utilized computer simulation on both the strategic management industry and is used throughout the globe in universities. Each business in the sector is run by either a squad of undergraduates / teams who have to fit their tactical wits against other teams in the firm and the contest is face-to-head. The item of the sector is athletic shoes, and the market's geographical complexity is local. The business that players run has factories to operate, a staff to pay, spending on supply and inventory inventories, decisions to make capital spending, advertising and wage promotion strategies. A platform to run, to find demand estimates and to take into account ups and downs in currency fluctuations, inflation and the share market.

Insight BSG

Branded Markets: Industries in North America, Asia, Europe, and Latin America can produce and sell the shoes in marketed countries, and they can bid to supply Canadian network distributors with private label shoes. Branded revenues can be sought via one or all of three sales channels (1) autonomous shoe companies, (2) corporate and operated retail outlets, and (3) specific sales on the website (Brynjolfsson and Mcafee, A.N.D.R.E.W., 2017).

Extensive Strategy Options: Companies can place their goods on the low end of the market, on the top end, and on cost, performance, and service close to the middle; they could have a wide or tight product line, small or large dealer networks, extensive or limited advertising. Demand situations, customs duties or wage rates vary from area to area. Business market shares are based on how the brand characteristics of each business are balanced against rivals ' efforts and truly competitive time and effort (Ramírez and Selsky, 2016). In a worldwide commodity market, raw materials used in footwear manufacturing are purchased at rates that rise or fall as a result of current supply-demand environmental conditions.

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TASK 1

Projected Y16 performance of BIOMAS 5

At present the BIOMAS 5 retaining 4th position at industry 40 scoreboard in UG BSG game. The earning per share for the year 16 counted as $7.98 which is higher than the investor’s expectations which is $5.25. return on equity is calculated as 25.3% against the investors’ expectations as 26%. Credit rating is A- and the measurers are quite similar to the investor’s expectations (Whitaker, 2017). Image rating projected as 96 against the stakeholder’s expectations as 77. Further financial measures state the following figures as net revenues of $1274172 that increased by 6.4% form Y15, net profit counted as $233389 which was recorded higher by 18.4% from the Y15. Closing cash balance recorded as $414855. Company’s financial rating also shows favourable results in order to get short term and long term loans. Credit rating of company is A- that refers that if organisation take a 1-year loan than the rate of interest will be 6.8% same as rate of interest for 5 years’ loan is 7.3%, for 10 year’s loan is 7.8% and the rate of interest on overdraft will be 8.8%.

Key strategic decisions made during the BSG simulations

BSG is an interactive activity wherein participants are split into groups and different participants are assigned to run a company in a head-to-head contest among various companies that are controlled by certain members of the team (Michael-Tsabari and Weiss, 2015). The report is to published for decision entries for the year 16. Different decisions are highlighted during the implementation of this simulation program which are considered a major consideration. The decision entries are bifurcated among compensation and training, branded production, Production facility, distribution and warehouse, internet marketing, wholesale marketing private label operations, Celebrity endorsements, corporative citizenships finance and cash flows.

The compensation and productivity data

The base wage in north America facility is cited as $36384 average, $22149 for Europe - Africa Facility, $12939 for Asia – Pacific Facility and $12945 for Latin America Facility. It is decided that change in base rate will be fluctuated as 1% in North America Facility, 0% change Europe-Africa facility, Asia – pacific facility with 1% of change and there will be no any change occurred in Latin America Facility. The fringe benefits also keep a certain aspect in terms of understating the regular compensation for better development and growth of entity. it is observed that the compensation at high level.

The overtime pays also recognised with fixed incentive rates and charges after adding the overtime pay overall compensation is receded higher at North America facility among all other facilities. The incentive pay was decided as a 11.3% in company at North America against industry average of 10.3%, in Europe – Africa Facility it is 11.75 against the industry average of 6.7%, in Asia – Pacific Facility the rate was decided as 16% against industry average of 16% and in Latin America Facility the rate was cited at 0% against 8.8% of industry average.

Strategic decisions regarding compensation and training of production workers

Base wage: Deciding the rate of wage payment is one of the essential and complex part for a business. Often, organisations bifurcate the wage rate on the basis of worker’s capacity and skills. A common concepts states that high skilled worker gets the consideration on the basis of higher rates and the low skilled worker get low consideration (Petrucelli, 2017). In some circumstances this wage rate system remains ineffective because the in large industries the average performance at the end of the year remain approximate equal because high skilled workers fails to maintain the consistency in their operations due to which the overall performance of organisation get impacted. The minimum wage rate for North America Facility was cited as $35734, $21440 for Europe – Africa Facility, $12612 for Asia – Pacific Facility and $12612 for Latin America Facility. 

Incentive pay: It is recognised as a reward in exchange of providing extra work by workers. A consideration that might enhance the interests of a worker and inspire them to function could be considered as an incentive (Lu, 2018). An incentive is intended to improve an organization's overall performance. Incentives may be categorized as remuneration, both directly and indirectly. As health plans, team strategies and corporate plans, these can be planned. A strategic criterion is fixed regarding the incentives to workers by management of BIOMAS during the simulation. The rate of incentives in North America was categorised as $1, at Europe -  Africa the rate was $0.75 and the rate of Asia – Pacific was cited as $0.75 and there is no any incentive provision made for Latin America Facility.

Fringe benefits: These are also considered as an additional benefit that remain exempted from taxation. For taxation purpose if the market price of such kind of benefits remain lower than the actual consideration than it would be chargeable (Bücker and Korzilius, 2015). For instance, a legal or convincing facility would be treated as Fringe benefit. The rate of fringe benefit is decided as $500 at North America Facility, $500 at Europe – Africa Facility, $500 at Asia – Pacific Facility at $500.

Regular compensation: There is a vital impact fall upon regular compensation of the above strategic decisions. The cost of the compensation will have increased due to enhancement of above costs (Geissdoerfer,., Bocken and Hultink, 2016). As the above industry growth it is recognised that compensation rate is higher at North America Facility. A revised rate was published in terms of best practice training as $400 for all the regions. The material cost impact also recognised in various forms.

Supervisory staff: the production ratio in order to consider the practical aspect to control the staff cost and enhance the profitability and productivity of operations in more strategic and effective manner. As the strategic positioning the staff cost rate was cited as 45 workers at North America Facility and Europe Facility. The overall impact falls upon supervisory compensation in terms of enhancement of 2% for all three regions.

Distribution and Warehouse:

In this case in order to get outcomes following inputs are filled:

Pairs

North America Market

Europe-Africa Market

Asia-Pacific Market

North America Warehouse

4576

90

0

Europe-Africa Warehouse

1325

800

1300

Asia-Pacific Warehouse

793

0

2656

Latin America Warehouse

1500

80

2048

Based on above inputs total distribution and warehouse costs are $ 29782,000, $ 42632, 000, $ 31293,000 and $ 64558,000 in North America Market, Europe-Africa Market, Asia-Pacific Market and Latin America Market respectively. Which indicates that maximum cost of  distribution and warehouse incurred towards Latin America Warehouse while minimum costs incurred in North America Warehouse.

Internet Market Decisions:

In order to reach at effective decision inputs entered are retail price, Search engine advertising and free shipping. Here Retail price are 97.00, 98.00, 94.00 and 99.00$ per pair sold online in North America Market, Europe-Africa Market, Asia-Pacific Market and Latin America Market respectively. While search engine advertising are $13000,000, $13000,000 , $14000,000  and $12500,000 in Latin America Market, Asia-Pacific Market, Europe-Africa Market and North America Market respectively. Also there are no free shipping facility in any of the market. Based on these inputs operating profits and margins are:

 

North America Market

Europe-Africa Market

Asia-Pacific Market

Latin America Market

Operating Profit

$39919000

$27499000

$31639000

$28386000

Operating Margin

40.60%

29.80%

35.10%

30.00%

North American market is most profitable as it provides highest 40.60% operating margin, while Operating profit from Europe-Africa market is minimum i.e. 29.80% as compared to other markets.

 

North America Market

Europe-Africa Market

Asia-Pacific Market

Latin America Market

Net Internet Revenue

$98331000

$92316000

$90214000

$94646000

Also revenue figures as shown below shows that net internet revenue form north American market is maximum i.e. $98331000 while minimum revenue i.e. 90214000 is generated from Asia-Pacific Market.

Wholesale Marketing Decision:

In case of Wholesale marketing decision following are key inputs:

North America Market

Europe-Africa Market

Asia-Pacific Market

Latin America Market

Wholesale Price to Retailers ($/pair)

68

70.2

67

70.95

Brand Advertising ($000s)

16000

16000

16000

16000

Mail-In Rebate ($3 to $15 per pair)

4

3

4

3

Delivery Time (1 to 4 week delivery)

2

2

2

2

Retailer Support ($0 to $10000 per outlet)

5750

4750

4000

2000

By applying above input net whole sale revenues are 251,872,000, 174,226,000, 170,613,000 and 186,981,000 in North America Market, Europe-Africa Market, Asia-Pacific Market and Latin America Market respectively. Which shows that Net-whole sale revenue form North America market i.e. $251,872,000 is maximum and minimum revenue of $170613000 is from Asia-Pacific market. While operating profits are $76269,000, $36853,000, $49427,000 and $42579,000 and respective operating margin are 30.3%, 21.2%, 29.0% and 22.8% from North America Market, Europe-Africa Market, Asia-Pacific Market and Latin America Market respectively. Above figures shows that operating profit form North-American Market is highest i.e. 76,269,000 (30.3%) while Europe-Africa Market is generating lowest operating profit of 36,853,000 (21.2%).

TASK 2

Imply and assessment of six supporting strategic concepts models and ideas subject to strategic approach

Strategic map - It relates to a graphical device designed to interact the long term business strategy clearly and to reach high-level objectives. It offers a wide range of advantages to a firm like–identifying goals, uniting all aims in to a particular strategy, representing a map showing how business strategies are going to affect others, giving each worker a clear goal to reach the main objectives. This paradigm of leadership offers a great way to communicate data in an easy circulatory layout regarding business objectives.  Thus, BIOMAS 5's executives could use this management model to obey the previous approach map to improve business performance and achieve its tactical outcome.

Balance scorecard - This deployment tool relates to a demonstrated and efficient way to influence a group toward the main aims. It primarily requires objectives based on high-level organizational objectives or measures that tactically achieve the same. Although this company has taken a step by giving gait evaluation method to exceed customer experience. In addition, it also requires specific projects or strategies that achieve goals and objectives (Velu, 2016). Therefore, BIOMAS 5 requires to be concerned about expanding stakeholder value in order to improve financial performance. It would help to individually identify a suitable product for clients. There, qualified strategist analyses how the client's requirements fit the surface, instead decides not whether the product to be acquired or not. Therefore, all of these techniques enable each organization to attract new customers and generate high income to accomplish strategic goals.

Gap Planning- It refers to a visual tool which is designed to clear communicate the business strategic plan as well as achieve high-level of goals. It offers a variety of benefits to a company like – identification of key goals, unified all goals into a single strategy, represent map that shows how business strategies will affect others, it gives every worker a clear goal for completing the main objectives (Hamada,., Kaneko and Hiji, 2017). This management model offers an excellent way for communicating the information about business objectives in a simple digestive format.  Therefore, using this management model, BIOMAS 5 its managers can follow the following strategy map for enhancing performance of business and accomplish its strategic objectives. As far as economic, external, training and development perspectives are concerned, BIOMAS 5 leadership can incorporate its cost dominance and standard approaches for distinction. It would help to increase the quality in the shoe business of the aforementioned business.

Blue ocean strategy -  Blue Ocean Approach is a model of strategic planning that emerged in 2005 in a book with same name. W wrote the book "Blue Ocean Strategy: What to Creating Unopposed Market Space and Making Contest Meaningless." Lecturers at the European Institute of Business Administration, Chan Kim and Renée Mauborgne. It is more than just conceptual. Some project management predictions are based on concepts that aren't comprehensive during beheadings in the go-to-market. Blue Ocean Strategy, on the other hand, actually originated even from a 10-year research study that analysed private company successes and failures in over 30 manufacturing industries (Meyer,. and Peng, 2016). It is based not on totally unproven theories, but on scientifically proven evidence. Trying to take a Blue Ocean strategy implies that your objective is not the best in class or to surpass the competitiveness. Rather, the goal is to rewrite the limits of the sector and operate within this new building, rendering competitiveness irrelevant.

Conventional circus appearances were bright-hearted children-oriented affairs, while Cirque provided a much more advanced experience with many of the top performers in the globe. In reality, many of the performances from Cirque featured incredible performances that couldn't be seen already. Through following the lead of Cirque du Soleil, it may be understandable: This Multinational media organisation started as a group of "crazy people" in the 1980s with such a dream of what the new circus might be. While children are still part of that particular crowd, adolescents will be guaranteed to become the much high ticket cost. Cirque du Soleil did not attempt to be a circus of imbeciles as well as performing animals— the business was completely redefined by its Blue Ocean Strategy.

VRIO framework - This model basically stands for value, rarity, imitability and organisation. this strategic planning process mainly correlate the vision statement with aggregate strategic outcomes. The key aim of this model can lead BIOMAS 5 to attain the competitive advantages at marketplace with more effective dimensions. The value tracks the opportunity with outside risks and significant sources. The imitability also affects the organisation’s deliverables (Trigeorgisand Reuer, 2017).

Baldrige Framework: This is one the finest strategic approach that negotiate the performance and effectiveness in order to organise the functions and approaches in more systematic and synchronised dimension. The approach also assists in manufacturing and serving the small entities for more practical outcomes. It mainly involves in various processes as classification of business problems and opting suitable approach (Zhao, and et. al., 2016).

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CONCLUSION

The above evaluation extracts the data from business strategic game simulation for BIOMAS 5. The key decisions are undertaken during the BSG simulations and also analysed with practical implications of strategic operations and techniques. The decisions are made in order to assess the performance of entity in major four regions as North America Facility, Europe – Africa Facility, Asia – Pacific Facility and Latin America Facility. After evaluating the key gaps, the strategic models were implemented with practical approach that helped in boosting the level of business at next level.

You may also like to read: Terminology Related to Business Environment

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