Report on Market Decisions of Chester co.

        The Traditional sector started out as a primary focus for the company, and the initial investments paid off early.  The automation was first pushed up to a 5, slightly lower than some of the competition, but the companies possible sales were the highest for the sector, while actual sales were the second highest due to a stock out.  Chester recorded the highest sales numbers for the sector in the second, third, and forth rounds, with an average contribution margin of 29.33%.  This was better than the average of the other teams in this sector due to Chester’s increase in both automation and capacity, the latter of which none of the other teams had increased by round four.  In round four, Baldwin moved their High End sensor into the Traditional sector, increasing their market share and making them sell the most units in almost every round for the Traditional sector after that.  Despite this, Chester maintained its relevance in the Traditional sector, because Chester’s contribution margin for the product was significantly higher than Baldwin’s, and higher on average than the competition. Even though less units were being sold, Chester was still making the most profit per unit in the market.  The automation for this market had to be lowered in round 6 (from 8 to 7), because it became impossible to move the product the amount needed to keep up with customers demand.  This sector was key to the company’s early game, being one of the better performing markets for Chester in the early rounds.  Even after that, the contribution margin in the later rounds made it so the Traditional sector was a big reason Chester stayed ahead of most of their competitors. 

Low End

The Low End market was one of the harder markets to gain an advantage in since everyone had very similar strategies, especially in the early rounds.  In the early rounds, the focus was to get our automation up to ten. In the first round it was increased to eight, nine in the second round, and then ten in the third round, where it remained until the end of the simulation.  The capacity was increased to 1,800 in round two, and then to 2,000 in round three,   in order to drive the variable costs of production down as this was the market with the most units sold. During the first several rounds there was an increase in units demanded year after year.  In round three, in an attempt to undercut the competition and make them take an emergency loan (due to them selling less sensors than predicted), we dropped the price more than we anticipated everyone else would. Price being the number one customer criteria in the low end.  This strategy worked, but we underestimated how much market share we would take, so we did not produce as much as we should have and stocked out way before our potential market share.  The majority of our main competitors lowered their prices the next round, with Andrews and Baldwin moving products from different sectors into the low end in order to take that market share. This caused us to lose sales in the low end, but made it so we had less competition in the performance and size markets. 

High End

The High End market was not one of Chester’s priority markets.  In round two one hundred of the capacity was sold in order to fund the other markets, mainly due to the low volume of units produced with the high selling price.  The only adjustments really made in this market were to move the sensor’s size and performance in order to keep it in the ideal range and its age low.  The main reason Chester chose to not focus on this market is Andrews and Digby created new units in this market early, giving them an advantage in market share, so Chester chose to focus on the traditional and low end markets. 

Performance

            The performance market was initially one of Chester’s weaker markets at the beginning of the simulation, due to only a $2,000,000 sales and promo budget being allocated to the sector.  This changed in round three when Adams decided to decrease the capacity of their product in the sector. We noticed that the only other team that had increased their automation in the Performance sector was Digby.  Chester decided to produce more sensors than would be demanded from their company since Andrews would not be able to meet their demand with their current capacity.  After this strategy worked, and seeing that Andrews did not increase their capacity in this market in the next round, Chester increased automation to five in order to increase the contribution margin for their product, and overproduced again in the next round in order to meet customer demand.   In round five, Adams had completely pulled out of the Performance market, and Chester increased their automation to six to keep lowering the variable costs of the product.  In round seven, Baldwin also pulled out of the Performance market, most likely due to their automation and capacity levels producing a negative contribution market in round 6, and left only Chester, Digby, and Erie to compete in this market for the rest of the game.  The performance market did not have the best contribution market for Chester, since its lower levels of automation and  how far the product had to be moved each year, but the consistently high levels of market share Chester had in this sector made up for it.

Size

            The Size market was another market that Chester did not invest heavily in the first round, not even moving the sensor enough to be in the ideal sport for the customers wants.  However, when the first round reports came out, Chester had the highest market share for the sector.  No other team had invested any automation in the Size market, so in round two Chester increased their automation level to 5 to make them be the team making the most money per product in the sector. We increased both the sales and promotion budget, and made sure the sensor was in the ideal position for the customers.  This strategy paid off in round three where Chester had 29% of the market share, and had the highest contribution margin for the sensors out of all of their competition.  In round five Digby also increased their automation in order to compete with Chester, but Baldwin pulled their sensor out of the market in round six meaning there was actually less competition.  Even though the market share between the teams evened out for the last several rounds, the main winners of the sector were Chester and Digby because of their increased levels of automation and capacity allowing them to have 36% and 30% contribution margins on their products respectively, with the rest of the competition having 1% or lower contribution margins for their products in round 7. 

Success and Shortcomings

            Chester was allowed to have the least amount of net loss throughout the majority of the simulation for a couple of key reasons.  Chester had the highest overall contribution margin average throughout the first 7 rounds (round 8 is excluded because it was more about selling off assets of your company to make the money back instead of acting like the simulation was going to continue because it made teams act differently than they would otherwise have). On average, their product was making more money per product than the other teams.  This was due to higher levels of automation and capacity across all markets than the majority of the competition, driving down the variable costs associated with the company.  In combination with the higher contribution margin, Chester had the second largest overall average market share, meaning that Chester not only was making more per product, but was also selling more of their product than almost anyone else.  These factors allowed Chester to follow the strategy of simply losing the least amount of money up until round eight.  Also, Chester’s ability to accurately predict how much they would sell and finance operations appropriately allowed them to avoid almost all emergency loans, (which charged a higher interest rate than normal,) and allowed them to spend less money per round on interest. 

            The shortcoming of the company is that they should have invested in new products to better compete in the markets.  Almost every competitor had a market segment where they had multiple products, which not only allowed them to increase their market share, but also increase the accessibility of their products faster than that of a company who only had one product in the market.  Chester should have created another High End sensor, and looked into the possibility of creating another sensor in the Performance or Size markets that they were already doing well in.  There were also a few rounds where Chester failed to predict the market, such as round two where the competitors dropped their prices lower in the Low End market, which made it so Chester did not sell as much as they expected.  This led to Chester lowering their prices even more, which caught other teams by surprise, and lead to a significant decrease in the overall price level of the Low End Market.