Capsim Strategy Essay

This step involves short and long term debt equity analysis. The proportion of equity capital depends on the possessing and additional funds will be raised. The choice of the source of funds the company has are the issue of shares and debentures, loans to be taken from banks and financial institutions and public deposits to be drawn in form of bonds. The choice will depend on relative merits and demerits of each source and period of financing. The management of the investment funds is key in allocating that the funds are going in the correct place. The profits that are made can be down in two ways dividend declaration which includes identifying the rate of dividends and retained profits in which the volume has to be decided which will depend upon expansion and diversification of the company. The management of cash is another important function. Cash is needed for all different aspects of the company such as payment of salaries, overhead and bills. All of these are important in a company and how successful the financial aspect is going to be.The financial management practices include capital structure decision, investment appraisal techniques, dividend policy, working capital management and financial performance assessment. A company needs to have well financial in order to be successful. “A company that sells well but has poor financial management can fail.” (Johnston)

Our team decided to choose the “Broad Differentiation” strategy as the basic strategy for our company. We will attempt to differentiate our product line in several distinct dimensions. By providing products that are vastly superior and unique from our competitors and pricing the products with an affordable price, we can gain something that is beneficial for the company in the future, which is customers’ loyalty and awareness. We may change or modify our strategy for the next round depending how it performs against our competitors.

The company position is strong enough so its better that company should use debt financing instead of equity financing.

Well-established and enjoys a good reputation and good relationships with its retailers. A respectable name in the industry is very important when it comes to standing out from the competition and contracting with different retailers.

Strengths (company’s internal factors from resources and capabilities)- Bass Pro Shops have a competitive advantage, which in the text is defined as “a firm has a marketing mix that the target market sees as better than a competitor’s mix” (Perreault et al, 2011 p. 47). The way that Bass Pro Shops has this competitive advantage is that its stores have become a tourist attraction making customers want to go into their stores to experience the unique environment that incorporates attractions and learning opportunities. In addition, Bass Pro Shops have gained recognition for their outstanding customer service. The people that

Contribution Margin = (Unit selling price – unit variable cost) / unit selling price = ($9.00 – $2.60) / $9.00 = 0.7111 = 71.111%

Based upon the firm’s low target leverage of 5%, low degree of operating leverage, and favorable credit history and financial outlook, the model assumes a cost of debt in line with AAA corporate debt at 7.02%. This estimate seems reasonable and sensitivity analysis shows a 1% decrease in the forecasted share price requires at least a 2.4% increase in the cost of debt.

Managing debt levels to maintain an investment grade credit rating as well as operate with an efficient capital structure for its growth plans and industry

It would only make sense that the company is paying attention to what their customers need, want, and think. If the company is up for it, they will create a loyal customer and a good sector in the marketplace in regards to their products.

In differentiation strategies, the emphasis is on creating value through sustainable uniqueness. This can be achieved through product innovations, superior quality, or superior service, which is then sustained and leveraged through creative advertising; brand-building and strong supply chain relationships. Another requirement for a successful differentiation strategy is that customers must be willing to pay more for the uniqueness of a product or service than the firm paid to create it. A differentiation strategy will lead to higher firm performance only if buyers value the attributes that make a product or service unique enough to pay a higher price for it or if they choose to buy from that firm preferentially. If

Business leaders, and in particular those from the Capsim simulation, who strategize to achieve optimal contribution margin will ultimately have greater profitability and sustainability. The difficulty in accomplishing this vision is that costs for both human and product resources will continue to increase as customer expectations on product and price continue to fluctuate, all of which impact contribution margin (PR Newswire, 2006). However, if ongoing analysis and response to costs and customer fluctuations are adhered, increased contribution margins will have a positive impact on:

Broad Differentiation is a strategy used when you provide a different product than rivals. The product would be relatively unique and of a high quality. That would set them apart from its rivals. It may be more expensive but consumers feel as if they are getting their money 's worth for a high quality product which is different than others. This firm offers something that other

- Competitors. This is not only other companies that produce similar products, but also anything else your customer can do to satisfy their needs.

Perceived differentiation is crucial for branding of a company’s product, especially against the many rival companies, which have very similar products to offer to the same audience (market) with the potential ability to make or break the company’s future prosperity.

These days, it can commonly be seen that many companies start offering customers the same products and services. Particularly, when it is likely that those products and services are in such high demand. For customers, this is a good value for them to have more options on selecting their most preferable and quality product. In consequence, this circumstance will encourage more competitive of trade in those products and services markets. Therefore, the most challenging work for emerging company is to consider how to make their own products preferred by most consumers. It may seem pointless to endeavour to compete in such environment. However, it still can be seen that many companies often do come into the marketplace and eventually succeed in selling products and services because they learned how to make their products and services become outstanding and unique than the others. We called this kind of practice as ‘product differentiation’.