Journal Entry 4 10/14/2011

The CAPSIM simulation has provided a very effective means of applying and clarifying what we learn in class by process of decision making. During the simulation, I have observed my own team members confuse the term or concept of strategy with application of strategy. For example, one team member said, "our strategy is to spend more than our competitors in marketing and sales while decreasing our variable costs." In actuality, our strategy as Digby is a hybrid of "Low Cost Provider with Product Cycle Focus" and "Niche Differentiation". One of the several methods we employ to enforce that strategy is by spending more on marketing and sales budgets, while decreasing our variable costs via automation investment. Thus, the CAPSIM simulation has created a series of epiphanies, if you will, to understanding and clarifying strategy concepts discussed in class; this also includes the reality of constraints that clearly force a firm, if that firm wishes to succeed, to pick their core competency and pursue it with all vigor.

A core competency reflects what one person or entity can do better than everyone else. For CAPSIM, the model we adopted to help us determine our strategy, reflecting our core competency, is adopted from the Forumla 1 case, the VRIO Model of Sustained Competitive Advantage.

We then move the the table form of the VRIO model and ask ourselves, in a variation from what Dr. Burke posted on the slides. Will this decision maximize value to the firm? Is it a rare move, relative to our competition? Will such yield to us a first mover advantage and thus be costly for our competitors to imitate? Will this decision allow us to exploit the target segment and eventually earn super-normal profits? The consequences of adopting this strategy were clearly seen yesterday.

We had a bad round one, biting off more than we could chew and getting hit with a big Al, destroying value of the firm. Adopting the VRIO strategy, we jumped forward significantly, gaining ground on every team, including the computer; in fact, aside from the computer, we were the only team that had a stock price increase. We also had products that did extremely well in the Performance, Size, and Traditional target segments, our segments of focus, yet we generated significant returns in the Low-End target segment. We feel we are also well positioned going into the next round, having earned a large amount of cash almost entirely generated from operations. Therefore, round three should prove even better than round two.