(Orlando, Florida) Mickey, cast a spell and dissolve my worries away.
Updates from the previous week, we sold off all of the productions and netted some profits. But considering that we sold out, there’s the unfortunate hindsight that we are charging too low and do not command enough market share. So, the challenge this week is to tweak our parameters a little to adjust the profit margin. Also, another team made a huge investment into Market A, effectively displacing us as the major competitor in the market with double our production capacity. This sent a lot of mixed signals to us. It’s already a fairly competitive market and then someone else invested to account for half of the market capacity. There’s going to be price competition going on.
Bringing in the next decision, I wanted to reduce our price in Market A, we’ll gain less profit but we’ll send a signal to the other team that we are not to mess with and they should cut off their sunk cost and move out of the market. But, the rest of the team wanted to increase the price to fight with our profit margins instead. Also, I wanted to increase capacity in Market B but they opted to maintain everything. Looks like things are not going my way but it’s a team decision and I’d voiced out my opinions. There’s still some time left to make amendments. So, we will see.
(Los Angeles, California) Still waiting to climb up.
How many times did you fail before? Let’s be honest and say plenty of times. But, failing isn’t a bad thing if there’s a lesson to be learn from it. What is important is to reflect on the mistake, analyze it and look at how it went wrong and future precautions. Do you get up from your failures? I’d failed too many times to count. How many of us would keep ourselves stuck in the cycle of failure and didn’t try to climb out of this pit of despair?
What did I do when I failed? I complained while others will blame others for the failure. People lose hope when they failed. Some even don’t care about it anymore. It’s not a matter of failing or success, but it is the matter of how we cope with failure. How do we deal with it? Are you going to get up every time you fall or give up? What is important that if you failed, you must be willing to struggle harder, get up and achieve your goals. Learn from the mistakes and try to correct them. Some people know that they’re wrong, but they just won’t change their style.
I believed that I am one of them. I wrote reflective post like this each time I went through a major setback. I know that it was my fault but I just won’t change. Worse still, this current mistake was very similar to what I did last year. I was burdened by it last year and wrote a post, promising to change. Yet history keeps on repeating itself because I never learned my lesson. Right now, I’m still stuck in the same cycle, I’m complaining about my failure here, lose hope, and promise to try harder next time. I am still stuck in the pit without planning to dig any foot holds to climb out of the pit. Perhaps, this time I will be true to my words, reflect on my mistakes and truly able to grow from them.
The Asia Business Conference concluded about two weeks ago. Yesterday was our post-event celebration party. The conference was a pretty good considering our limited resources and time.
I learned a lot through this conference planning. I was in the Operations, meaning that I have to handle the behind the scenes planning. I’ll list down what I takeaway from this experience.
- The world is very uncertain, something I’m sure not learned in school. I have to decisions in the dark without the full information and then make alterations to get things through.
- Do not refuse any help like I usually do. They are a godsend, especially in crunch time. In such scenario, being the lone wolf is not the best viable option and teamwork is especially crucial. I can’t thank you guys enough for the help and information offered.
- I learned the value of good human capital. I would rather have an excellent person who can handle the workload and do things well, rather than a few who just can’t get things right. I realized that’s why major firms have such rigorous interviewing process, they judge the interviewees for their passion and personality.
I also must polish my karaoke repertoire. I’m pretty sure I embarrassed myself with my terrible singing and tendency to forgot the tune.
(Miami, Florida) Too many competitors fighting for a piece of the pie.
The result of Week 2 was out, the price we charged in Market A was about 25% high than our closest competitor. They undercut us and produce more beyond their capacity, resulting in us losing some sales and storing some in the inventory. It is still a pretty good week because we are taking advantage of the capacity constraint in the market to sell at high price to recoup some of the initial investment.
The duopolistic approach taken was no longer applicable in Week 3 because there are now more participants in the market A. However, due to the previous capacity investment, my team is still the dominant power around in market A. However, the new players really shook us, and we decided to price much lower than anyone would expect to scare them off, where we cut off almost half of our initial price to wage a price war with the other firms. We still decided to invest more in our capacity to take in more market share.
In Market B, we opted to enter in small capacity because of resource constraint but also to see the economic environment in Market B. We price it low, slightly lower than the lowest competitor in the previous period. For this period, it’s not about recouping our investment, but more to the point of “We’re here, and you guys better watched out for us!” We made another investment, almost doubling what we invested last time to show our commitment to stay in this market.
Market C and D are not in our concern yet. Each market has two firms in it, making it very enticing to enter, but we want to established our dominance in Market A and B before entering others. It would be even better if the other competitors would forgo their Market A and B, and just enter the other markets.
(Orlando, Florida) Fiery explosion of spectacular performance
I am currently enrolled in a Competitive Strategy Game by Haas Business School. It was created by Severin Borenstein, my professor’s thesis advisor. He was very enthusiastic about this game, and I can’t see why not. The game mimics real situation where firms only know about their production cost but not of other firms. This really test the judgment because depending on the decisions made, the initial investment could turn into profits or losses.
I’m recording the team’s thought plan over here. So that, I could look back here in retrospective and figure out what had gone wrong. Of course, the main motive of the game is to maximize profit and that is just what I intend to achieve.
In the first week, we could only invest in one market and decide on the production capacity. Because the game is all about uncertainty and analysis, my team spent roughly 12 hours creating spreadsheets and the basic intuition to succeed in the game. We derived rough demand curves and estimated future calculations from these curves. We arrived towards two markets, both almost equally appealing. Let’s call thee first market, Market A. For our firm, we have a good lower marginal cost but somewhat higher capacity cost and entry cost. You can think of this as Mexico. The other market, let’s call it Market B, we have very low marginal cost. Think of the production facility akin to China. We are very sure that we have the lowest marginal cost among the competitors, but this is a differentiated goods market, so other firms would still control some market share despite the price difference. The net present value was also the highest in this market, if we could command a monopoly in the market. Here’s where the team divided, some wanted to invest in Market A because it’s easier to fight on cost in that market. But I wanted in go to Market B because of the high profit prospect. We came to the conclusion of investing in Market A, but just with half of our investment capital. That way, we still have some cash to go to other market if needed.
The result of all firms’ decisions came in. There’s a duopoly in Market A, including us but both teams are playing it safe because the production capacity is somewhat lower than the optimum capacity. Surprisingly, Market B was crowded with firms, probably coming to the same conclusion that Market B is a good investment. There are little activities in other markets, one with no firms entering it and the other with a monopoly. Because of the duopoly, I recommended that we charge a very high price for our goods because there’s bound to be a shortage in the market. We charge at almost 10x our marginal cost for the largest recoupment we can get. Our calculations was that we could fulfill almost every demand in the market despite even if the competitor undercut us. We also foray in the hotly crowded Market B, for despite the competition, we still have the comparative advantage on our side. But still, the investment is small just to test the water.