CAPSIM SIMULATION

REPORT
BUSS6000 – Succeeding in Business

Leading in Innovation

Dr. Helen Parker

Yihong Liu and Victor Poulsen
Baihaki Ageng Sela 440056160
1. OVERVIEW OF SIMULATION
1.1. BACKGROUND
Digby was established in 2016 along with
five other competitors, as the result of the
monopoly commission’s decision to split up
MediCorp. In 2017, these six companies
started their journey to compete in the
1.2. COMPANY OVERVIEW
1.2.1. VISION AND STRATEGY
Digby started its journey with a vision
“Leading in Innovation”. Digby’s main
strategy to achieve its vision is to
emphasize global broad differentiation. Its
strategy is to maintain its existence in both
budget and performance market.
Competitive advantage is achieved by
focusing on R&D that meets customer
satisfaction criteria, drives an aggressive
marketing strategy and expands capacity to
meet growth demand (CAPSIM 2016g, p.
14). Four criteria were chosen to measure
the effectiveness of the strategy as shown in
Figure 1.
Cummulative
ROE
Profit
Share Price Share Market
Figure 1 Success measure criteria (CAPSIM 2016h)
genetic testing device industry in a global
market with zero sum characteristics,
where every sale Digby makes one
competitor loses (CAPSIM 2016a, pp. 6-7).
1.2.2. THE JOURNEY
Digby’s success in the global market will not
be achieved without the development of its
four excellent products: Daze, Dazy, Dog,
and Doge, as a result of a Broad
Differentiator Strategy. This strategy was
supported by two objectives: meet
customer satisfaction criteria and achieve
excellent strategic decision making.
Daze was the first product to be introduced
in the market in 2017, with product
features identical to those of competitors;
however, Daze was strategically prepared
for 2020 in the budget market. In 2017,
Digby developed three other products
simultaneously: Dazy, Dog, and Doge. Dazy
was introduced in 2018 to accompany Daze
in the budget segment, while Dog and Doge
were developed for the performance
market and entered the market in 2018 and
2020. At the end of 2020, these four
products were the leader in sales for both
segments in the global market.
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2. CRITICAL ANALYSIS OF THE CHANGING ENVIRONMENT
2.1. EXTERNAL ENVIRONMENT
In order to analyse the attractiveness of the
genetic device testing industry, five
competitive forces from Porter’s five forces
framework are applied as in Figure 2.
Figure 2 Porter’s five forces (Johnson, et al. 2012, pp. 44)
2.2. INTERNAL ENVIRONMENT
Based on the industry life cycle model, in
the development stages in the first two
years, all the companies’ focus was on R&D
and building their strategic position
(Johnson, Whittington and Scholes 2012a, p.
33). Based on the market analysis, the
budget segment was the biggest market
(CAPSIM 2016b, p. 4), and hence the
majority of competitors entered the budget
segment.
As almost every company entered the
budget market, the price wars in the budget
market were inevitable, and as a result in
2018 industry profits decreased around 30-
50% (CAPSIM 2016d, p. 1). The lesson
learned is that price wars lead to unhealthy
competition and unhealthy financial
performance. Digby tried to negotiate with
competitors to increase its price; however,
the negotiations ended up in deadlock.
 Market penetration strategy
As a result of the deadlock on price war
negotiations, Digby built a new strategy
using market penetration as part of the
Threat of new entrants and substitutes are
low because as prearranged in 2016 the
industry has monopolistic characteristics. In
contrast, competitive rivalry and buyer
power are high, as the customer buying
criteria demands better specifications every
year, and customers can easily switch to
competitors. The supplier power in this
industry is medium, where material,
shipping, and outsourcing costs influence
the cost of goods sold (CAPSIM 2016a, p.
42).
Ansoff corporate strategy framework, and
with this strategy the company tried to
increase its share of the market with
current products using an aggressive
marketing and sales strategy (Johnson,
Whittington and Scholes 2012c, p. 114). In
order to penetrate the market, Digby
increased the marketing budget
significantly (Figure 3). This strategy was
successfully implemented. In the end of
2020, Digby earned more profit than the
combined profit of all competitors, as
shown in the below graph (Figure 4).
Digby's Marketing And Sales
Budget
40,000
30,000
20,000
10,000
0
2017 2018 2019 2020
Figure 3 Digby’s Marketing & Sales Budget (Capsim
2016c-2016f)
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 Profit Each Company in 2020 Europe’s with less marketing expenditure
as shown in Figure 5 & 6.
($1,315), -2%
Andrews
$7,238 , 12%
Digby's Profit in Each Region
$9,312 , 16% Baldwin
$5,448 , 9% $12,000,000
Chester
$5,606 , 10% $10,000,000
Digby
$8,000,000
$29,432 , 51% Erie
$6,000,000
Ferris
$4,000,000

$2,000,000

$0
Figure 4 Profit Each Company in 2020 (CAPSIM
AMERICA EUROPE ASIA
2016f, p. 1) \

 Blue Ocean Strategy Figure 5 Profit in each region in 2020 (CAPSIM 2016f,
p. 1)
However, using the market penetration
framework is quite costly and can be easily
Digby's Marketing Expenditure in Each
copied. Digby also developed other Region
strategies using the blue ocean framework.
A blue ocean is a new market space where
$13,950
competition is minimised (Johnson,
$12,000
Whittington and Scholes 2012a, p. 58).
Digby has been aiming at the Asian market
since the beginning of competition whereas $5,500
other competitors have tried to avoid these
markets since the market size is still small.
In the first three years, Digby built brand America Europe Asia
awareness in Asia, and by the end of 2020,
Digby earned almost the same profit as its Figure 6 marketing budget in each region in 2020
American business, and higher than (CAPSIM 2016f, pp. 8-13)

3. REVIEW OF THE COMPANY’S PERFORMANCE

Broad differentiator was the main strategy  Meet Customer Satisfaction

of the company, as Porter suggests the
company may gain competitive advantage
by promoting uniqueness that is valued by
customers to charge a price premium
(Johnson, Whittington and Scholes 2012b, p.
96). Digby succeeded in the global market
by achieving two objective that support
Digby’s broad differentiator strategy. The
two objective were aimed by Digby are
mentioned below:
Digby maximises the potential ability of its
four departments to achieve high customer
satisfaction. In Figure 7, it can be seen that
Digby invested heavily in its R&D and
Marketing Department compared to its
competitors to create excellent and unique
products and increase customer awareness.

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 could engage in to gain the highest payoff
TOTAL SPENDING IN R&D AND
MARKETING (Investopedia 2016). Table 2 is an example
of how Digby made predictions in the Asian
Ferris $50,627.00 Market in 2020.
Erie $61,512.00
Digby $93,020.00
Competitor 2019 Result 2020 Decision
Prediction
Chester $90,973.00 Erie Made a profit by Used the same
Baldwin $60,368.00 using zero strategy
marketing budget
Andrews $51,868.00 Chester Made a big loss by Copied Erie’s
using high strategy
$- $25,000.00 $50,000.00 $75,000.00$100,000.00
marketing budget
Baldwin Never entered the Same strategy
and Able Asian market
Figure 7 - Total R&D and Marketing Budget 2017-2020
Digby Made a good profit ?
(Capsim 2016c-2016f)
Table 2 - Competitor decision prediction (Capsim 2016g,
In the production and finance departments, pp. 12-13)
Digby aggressively increased the
automation capacity and created high Based on the above analysis, the best
margins that enabled Digby to spend more decision for Digby was to be more
aggressive in the market not only to ensure
in marketing compared with competitors as
growth but also to take competitor market
shown in Table 1. Furthermore, Digby also
share. However, Digby also considered the
increased its account receivables to 60 days,
worst case when Baldwin and Able entered
which attract more potential customer. the market. As a result, Digby managed to
lead the Asian market with 45% of market
Capacity Automation
share in 2020 (CAPSIM 2016f, p. 1). Digby
Andrews 1500 6.5
used the game theory framework to
Baldwin 2300 5
produce strategic decisions and remain one
Chester 2100 6
Digby 5429 8
step ahead of its competitors every year.
Erie 2566 8 The company’s Blue Ocean and market
Ferris 3750 5 penetration strategies are examples of the
result of this framework.
Table 1 - Production comparison 2020 (CAPSIM 2016f, p. 5)
The broad differentiator strategy and these
By maximising these four departments, two elements helped Digby to achieve its
Digby has created a successful broad vision to be the leader in its industry. Based
differentiator strategy that meets high on the four measures of successful criteria,
customer satisfaction. Digby was the highest among its
competitors, as summarized below in Table
 Excellent Strategic Decision Making 3.

Every year competitors used a different Cumulative Average Share Average

Profit ROE Price Market
strategy that caused dynamic change in the (000) (%) ($) Share
competition. The one who can predict the (%)
best decisions made by competitors may Andrews $19,951 11.6 31.34 13.4
gain competitive advantage by acting Baldwin $8,224 5 21.20 12.8
Chester ($5,006) (0.4) 10.69 17
differently. The Nash equilibrium in game
Digby $51,991 16.5 58.31 25.8
theory was the main framework used by the Erie $28,779 12.3 35.44 19.1
company. The main goal of the Nash Ferris ($2,031) (0.8) 8.40 0.75
equilibrium is to make the best decision by
predicting a set of actions that a competitor Table 1 Industry financial results 2020 (Capsim 2016h)

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4. RECOMMENDATION
Competition in the future will be more
challenging and fierce. To ensure the
company maintains its sustainable growth,
the following recommendations are made:
1. Change its main strategy to a global
focus differentiator strategy
Digby is the leader in performance and
budget market currently. However,
maintaining its market share in both
segments in the future may be difficult.
Based on the future demand forecast in four
years, the performance market may grow
faster than the budget segment. Digby
should change its strategy to become a
global focus differentiator whereby the
company will focus upon the performance
segment globally by developing excellent
product specifications, high awareness, and
easy accessibility; and may also tailor its
strategy to local market needs (Capsim
2016g, p. 10).
5. GROUP REFLECTION
Digby’s success over the four-year
simulation affected how we worked as a
team. There are three factors that
influenced our success: type of team,
individual dynamics and leadership style.
 Type of team
During the simulation we experienced three
model types of teams: Problem solving,
Cross functional, and Virtual teams. During
the practice round, our first team style was
problem solving where each department
makes decisions by themselves (Robbins et
al. 2014b, p. 221). Five members of our
team took different roles and there was no
leader in our group. I found that this was
not effective because everyone takes
decisions without understanding other
2. Mergers and acquisitions
Mergers and acquisitions is an alternative
choice to maintain its sustainable growth.
Based on its competencies, Digby should
focus on the performance market. Chester
was the most viable option to be acquired,
based on Chester’s spending almost the
same as Digby in marketing and R&D.
Chester’s share price is one of the lowest
among the companies; however, Chester
has high awareness and accessibility in the
market.
The main problem in Chester was the
management strategy. Digby was confident
that it could oversee a positive turnaround
for Chester in financial performance by
replacing management with new
management. Acquiring Chester would be a
perfect strategy to penetrate the budget
segment.
members’ responsibilities, and if we did not
change it our results might have been worse
than the real ones.
Figure 7 – One of group meeting
When the real simulation round started, I
decided to take the role of leader of the
group and changed the team style to be a
cross-functional team, whereby everyone
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from different departments worked
together to accomplish a task (Robbins et al.
2014b, p. 222). The transformation ran
smoothly. Everyone started to understand
that their decision affected all other
departments. This understanding is
important because the key to the success of
this simulation was how we made decisions
that fit across the department.
After round two, I changed the team style to
virtual teams where all the members used
computer technology to achieve common
goals and the majority of the work was done
remotely (Robbins et al. 2014b, p. 222).
Since the team had already managed to
make decisions that fit across departments,
it was more effective than the previous style.
It can be seen in the results of the last round
where the profit was more than that
combined in the first three rounds.
Digby's Profit 2017-2020
$9,356 , 18%
$29,432 , $5,947 , 11%
57%
$7,255 , 14%
2017 2018 2019 2020
Figure 8 Digby’s Profit in 2017-2020 (Capsim 2016c-
2016f)
 Individual Dynamics
From the team player style survey, my main
role was contributor; however, the distance
between the four styles is not far, as shown
on Figure 9. During the simulation when I
became a leader, I used the challenger style
more often.
440056160 Team Player Style
Challenger
Communicator
Collaborator
Contributor
0 20 40 60
Figure 9 440056150 Team Player Style
In a real simulation, every week I made one-
to-one or one- to-two face meetings to
discuss their decision over 2-3 hours. The
goal was to make every member have the
same goal, either more profit by meeting
customer satisfaction or reducing the cost
without decreasing potential sales.
 Leadership
Finally, Leadership style also the main
factor that contributed to team success.
Organisation need strong leadership to
achieve certain vision (Robbins et al. 2014a,
p. 160). Our leadership model closed to
transformational leadership.
There 4 main characteristic of
Transformational Leader: Idealised
Influenced, Inspirational Motivation,
Intellectual Stimulation, and Individualised
Consideration (Robbins et al. 2014a, p.
170). In the simulation I provide a vision to
team that we have to be number one and all
of us can achieved it. When making decision
I am taking individual consideration by
doing discussion one to one or one to two,
during the discussion I emphasis in rational,
careful decision and expected them to take
decision that more advance than the
competitor.
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 rejected as they afraid might lost as we
already number one so we did not required
aggressive strategy that might lost our
position. However I manage to influence
them by show how the worst case scenario
would not affected our position.

In conclusion the primary of success of

Digby team is because everyone in our team
doing their best effort and worked together.
While my duty was to facilitate them to
know their potential ability and used it to
Figure 10 - Another of Group Meeting
the maximum to achieve the same vision
which is to be number one in the
In round 3 I try to change the strategy to
simulation.
market penetration, everyone at that time

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