Strategic Thinking Process: Simulation for Startup Success case Study

Strategic Thinking Process: Simulation for Startup Success

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Introduction: Strategic Planning Simulation for Global Startup SpeedCycle's Expansion

Strategic thinking is the most important ability that managers of every organization whether big or small need to possess (Goldmanand Scott, 2016). SpeedCycle is a company operating in four countries Brazil, India, China, and South Africa. The company thinks that its presence in these locations will help in improving the economic wellness of the communities that are related to the company and the company also focuses on supporting these communities, it is very important to fulfill their social responsibility by providing some expenses to society. 

The report is been conducted to recognize the scopes of strategic thinking in a start-up company and the report considered the case company Speedcycle. The case company is a start-up company which follows strategic analysis to examine the cause of failure of the company. Because of the various kinds of difficulties that are experienced by the company, it is a very serious matter and this requires a manager to be capable of adopting strategic thinking (Betz, 2016). In this regard, the company needs to have its own opinions on strategic thinking and the views which are analyzed by the report. The main purpose of this report is to analyze the result which further suggests having the vision, having systems thinking, the ability to analyze, the ability to question, the ability to create, to make synergy and creativity and innovation which provides advantage which are the main elements of strategic thinking process for successful managers of the case company. In addition, the report also discusses strategic simulation and its importance in the start-up business Speedcycle. The report highlights the strategic thinking process involved in simulation and also the importance of value created by strategy is been explained.

1. Analysis of the strategic thinking process involved during the simulation

1.1 Strategy analysis

With the help of strategic analysis planning for the goals and objectives is done efficiently (Aakerand Moorman, 2017). Strategic analysis is very important to express strategic planning of the company for making decisions and effective working environment in the organization. Strategic analysis is done through researching the business environment of an organization in which business operates. The strategic analysis permits the company to look toward the positive attributes that have a huge effect on the company. By evaluating these attributes an organization focuses on the factors which help in leading toward the performance and desire strategy. 

VRIO Framework

The VRIO framework is a strategic planning process that relates to the vision of the company than the overall strategy. The vision of the speed cycle is to become the leading bicycle manufacturer in the world (Knott, 2015). The ultimate goal of the model is that the outcome is a competitive advantage in the marketplace. This model is adopted by the company to determine how the resources of a company like finance, supply chain, human resources, brand management, etc add value to the competitive advantage by using the company's capabilities (Geraldeset<,i>. al.<,i> 2019) The table below shows the tabular representation of company’s VIRO Framework. 

1.2 Strategic choice and formulation

Strategy formulation means the procedure of selecting the most suitable action for realizing the goals and objectives of the organization by achieving the organizational vision. The procedure of strategy formulation is made of basically six steps. These steps are not into following a rigid order but are in a very rational form that can be easily followed. The steps of strategy formulation are as follows:

• Setting Organizations’ objectives –It is very well known that strategies are usually intermediation in the realization of organizational objectives. This strategy involves both the medium of realization and fixing the objectives of the company. 
• Evaluating the environment of the organization – the next step is to value the economic and also industrial environment in which the organization operates (Engert and Baumgartner, 2016). This step includes looking into the organization's competitive position.
• Selecting and setting quantitative targets – an organization must focus on setting the quantitative target for the organization's objectives. The main idea behind this is to evaluate the contribution that may make various operating departments and product zones. 
• Aiming in regarding the divisional plans - the contribution made by every individual, product division, and department in the organization is identified by which strategic planning is directed for every unit. 
• Performance Analysis –it involves evaluating and developing the gap between the planned performance and desired performance. This evaluation recognizes the gap that continues between the reality and long-term ambitions of the organization (Dayanet<,i>. al.<,i> 2017). 
• Choice of Strategy - In this step the main course of action is selected after evaluating and analyzing organizational goals, strengths, capabilities, weaknesses, and also external opportunities.

1.3 Strategy implementation

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SWOT analysis

Strengths 

The strength of the company is the core competency that is the part of the strategic implementation and is used by the company to achieve its goals and objectives. The company is dealing in four countries which are Brazil, China, India, China, and South Africa which makes the company a global competitor (Berry, 2017). The prices of cycles are very affordable which makes the company budget friendly for the customers. The company is also hiring an expert team to focus on boosting profits. 

Weakness 

The main drawback of the Speedcycle is huge competition, the company operates in an industry where there are so many competitors dealing is the same product which is a cycle. For being different from other, the company needs to focus on its product and try to innovate and bring creation. One of the reasons behind the failure of a company is a lack of knowledge regarding the target market because of inexperience. 

Opportunities 

There are several opportunities for a speed cycle as the company is dealing in four emerging economic countries which are India, Brazil, and South Africa. The company is free to invest in more advanced and vigorous technology in innovating and designing bicycles. The company always has opportunities for collaboration and strategic partnership which can further enhance the brand image of the company in the global market (Kumarapeli, 2019). The company can also use the opportunity of advertising through various social media platforms which will influence the customer’s decision. 

Threats 

The main threats for the company are from the frequently changing government policies which affect the company directly or indirectly. Several incidents caused are threats to the company but the main threat for the company is the increasing competitors which are dealing with producing the same products as the speed cycle. So the company needs to focus on being innovative and offer better facilities to its customers. 

2. Assessment of important strategic thinking processes during the simulation

2.1 Pestle analysis

The case company Speedcycle is a start-up company dealing in the manufacturing of bicycles, the company is operating in India, Brazil, and South Africa. Speed cycle is an emerging company that is looking forward to improving its working and enhancing it’s manufacturing in the selected country. The company has chosen to trade in China rather than the Japan because the China market is considered the best option for a start-up company which is identified with the help of PESTEL analyses. PESTEL analyses help in examining the factors such as economic, social, technological, legal, and environmental for a better assessment of the strategic thinking process.

Political 

The establishment of Speed Cycle in China helps in the development of international foreign trade relationships, labor, and environmental law, and tax policy. These political factors will help the company to work in a different environment and understand the needs and demands of each country's customers(Perera, 2017). 

Economic 

Each country has a significant impact on the company which includes the effect on profit through retail distribution. Through this diversification, companies have the option to gain benefits from interest rates, exchange rates, and most important income benefits. The company is also adoptive to every country's interest rate control, expenditure of government policies, and taxation policy. 

Social 

The social culture of each country is different as each country in which the company is operating is different from the other in every aspect. The social culture includes shared beliefs and attitudes of the general public of the country. The main benefit of these factors is that company can supply cycles according to every age range in the locality. These impacts have a direct effect on marketers on how to know the customers and their needs. 

Technological 

Technologicalchanges from time to time and the impact of these changes are huge on the products. Speed Cycle focuses on new methods of manufacturing its products, new ways of distributing them, and also new solutions for communicating with the target audience (Christodoulou and Cullinane, 2019). the main focus of the company is on revolving around new technologies and updating its working pattern according to the country in which they are operating by manufacturing new model every year for being updated with the new technological space.

Legal 

The establishment of the Speed cycle in each selected country has a huge impact on the legal system by producing a durable cycle that will further foster health and safety. a company needs to know what are the legal aspects of each country in which it is operating. 

Environment 

The company has planned to manufacture eco-friendly bicycles which are electrical by considering the CSR responsibility of the company. The company is launching its eco-friendly bicycle in all four countries most of these bicycles are manufactured in China and exported to other partner countries. China offers various technologies which are helpful in the manufacturing of eco-friendly bicycles. 

2.2 Reason for choosing country A rather than country B

After all, it is a very good location in a business-friendly destination, and also offers great opportunities to start-ups and customers from all over the world (Gaur,et. al.<,i> 2018) The main reason behind choosing China for doing business with the company are the following:

• The country has various options for finance and investment; there are so many big companies that offer investment opportunities to start-ups. 
• China is a very dynamic marketplace currently, there is around 5.6 million private sectors business operating and there are several opportunities for the company. 
• The positive point for the company is that the China market offers various opportunities. 

2.3 Consequences

The major consequences because of which company does not choose to operate in Japan market is 

• The other major consequences, there are various economic challenges, there is a huge fluctuation in interest rates and a rise in inflation day by day which is the biggest drawback for the failure of the company. 
• Another consequence is that there are so many supply chain challenges that the company has faced. 
• Japan does not have as many opportunities as China, and so many threats like almost all of the population are using public transportation due to which company has less chance to succeed. 

2.4 Positive and Negative effects of investing in a Marketing and R&D

The company focused on investing a huge amount in marketing and research and development because these factors are of utmost help for every start-up company operating in different countries. 

The positive impact of these two factors 

Marketing– it is important for a business to invest in marketing skills because it offers several benefits especially to start-ups business. 

• Helps in enhancing sales 
• Marketing improves the reputation of the company
• Focuses on retaining customers 
• Helps in spreading company names all over the market
• Helps in attracting new customers 

Research and development – R&D is a very essential factor for start-ups as it assists in enlightening the processes and also produces better and new products and services that further help increases profit for the company (Renet. al.<,i> 2015). Benefits of conducting R&D are 

• It offers an exclusive selling point for the company
• It boosts income and profits for the company
• Helps in attracting more investors and raise funding
• The company gains competitive advantages 

The negative impact of these two factors which influence the growth of the company is 

Marketing: The biggest fallback for the company in using marketing is that the company was using the same marketing technique in all four countries. All four companies with which the company is dealing have a vast difference in their culture and mentality of the audience, the management team of the company failed to do proper marketing, they used similar techniques to promote their product in all four countries. This is the biggest drawback that caused a huge impact on the growth of the company. 

Research and Development: R&D always has some risk factors it which has a great influence on the growth of the company. The research of the company resulted in the modification of the product which was very costly to develop, and in the development of that production company faced huge losses after all that product was a big failure in the market. 

3. Analyze how the choices and strategy created value

3.1 Cause behind the failure of the team's choice in adding value 

As a result of the company's strategic planning, some of the team choices failed because of improper planning. The major cause of failure in adding value to the company is that the management team of the company did not focus on preparing a plan they just used secondary data and copied the planning of other companies. The second most important reason for failure is that R&D did not focus on understanding the environment and also did not consider the previous results. The next important aspect behind failure is that team has the partial commitment, the team needs to be fully understood the strategic planning and work on improving their enterprise. The major reason for failure is the ignoring of the marketplace reality by the team members. The team has fully neglected the market reality and problems which were arising from earlier plans.

3.2 Recommendation

 The planning team is required to pay attention to bringing change in the business environment and also needs to set meaningful priorities by developing the requirements of the company and pursuing results. It is very important to focus on facts and assumptions before planning any kind of strategy and making any kind of decision. 

A recommendation for the company is to focus on investment in product enhancement and also innovation for gaining a competitive advantage. The company needs to motivate its staff by offering bonuses and paid holidays which will help in increasing production efficiency(Rožmanet. al.<,i> 2017) The company must concurrently adopt strategies that retain customers in the long run and decrease the effects of substitute products in the customers. It is recommended that the company should involve in risk analysis in its management strategies to provide a critical view of the analysis of the strategic choices of the company (Tantaloand Priem, 2016).

4. Demonstrate critical use to assess the international strategy simulation’s competitive, strategic

For analyzing the competitive strategy, the company can consider applying porter's five force model which helps in analyzing and evaluating various factors by which a company can attain competitive advantage and also their ability to attain maximum profitability. Porter's five force model states the five forces which are related to the attainment of competitive advantage for the company the forces are competitive rivalry, threats of entry, bargaining power of suppliers, bargaining power of buyers, and threats of substitutes. The detailed description of forces is as follows:

4.1 Porter5 forces model

The business simulation reflects the competition faced by the company against all its rival companies, without any kind of strategy it is very difficult or nearly impossible to maximize profits and gain share in the market. The industry will try to enter the market by offering several prices and different and better products which will drop as the business grow. When the competitive rivalry is high the company is permitted to offer lower prices to retain its position in the market. If the competition is low then the company can charge the price according to its perspective (Bruijland Gerard, 2018). The company is allowed to charge low prices to achieve more sales, retain its business position, and also to maintain its market share. 

Threats of entry

A company's market share is affected by the threats of new entrants. The company's position in the market is threatened by the usage of fewer resources to enter the industry. The less time and money cost for a competitor in entering the market is an effective option for competitors than establishing a whole new position in the market. the industry with strong barriers to entry is perfect for existing companies within the industry since the company will be able to negotiate on terms and also able to charge high prices. 

Power of suppliers

The next important factor in the model is the power of suppliers which addresses how easily suppliers have control over the cost of input. This is affected by the number of suppliers of main inputs needed for the goods and services. The importance of suppliers depends on how unique the materials are they providing and how much will it cost for the company to switch to another supplier (Lüttgensand Diener, 2016). Because switching to a whole new supplier will bring a huge cost for the company, if there are fewer suppliers in the industry it will be more costly for the company to switch. As the outcome of this supplier enjoys the power and drives the input cost and attains another advantage in trade. 

Power of customers

The ability which customers have to affect the prices is one of the most important factors of the five-force model. It depends on the number of customers or buyer a company have and also on the significance of each customer, how much will it cost the company to find a new customer base or a different market for its output? A smaller client base reflects more powerful customers' power over the company. 

Threats of substitute

The last factor of the force model is the threat to substitute products, every company has a substitute product or service to it, in this, the case company speed cycle has many different substitutes which deal in the same market which poses threats to the company. Companies that produce goods and services that do not have any substitute enjoy more power in the market and also have control over the price. But in the case of the close substitute here the customer enjoys the power of controlling the power of prices and demand.

Conclusion

Speed cycle entered the international market with great strategies which helps the company to achieve its mission and vision. The company failed in retaining its position in the business simulation even after conducting proper marketing and research. The company was not able to fulfill the needs of its customers and was also unable to sustain a competitive advantage. For this report, it is concluded that it is very important for a company to note that the marketplace is rapidly changing and there is a great need to invest in the development of products and innovation to retain its position in the market. 

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