Main business objectives of Cygnus motors
Introduction
The main business objectives of Cygnus motors were to be environmentally friendly by selling and developing green cars like zero-emission or low emission cars, as well as to generate an organisational as well as a financial performance where there is neither profit nor loss and share at least 5% of the automobile market.
Based on the case organisation’s stimulation of sales and financial performance, the sales value had increased over the time period from an estimated £2850.84m from round 1 to £4647.26m by round 4. However, they have failed to meet the target of 5% market share by around 4 which may be because of lowered sales rate of models ‘Eternal’ and ‘Tangent.’ However, it has also been seen that the company has been able to increase its productivity from 31.35cars/worker/year from around 1 to 63.87 in round 3 but decreased to 48.78 cars/worker/year and may also be one of the reasons for not meeting the 5% market share target. Overall, the company had reported a gross profit of £1654.78m for round 4 based on the strategies used by the company.
Financial measures | Values (£m) |
Total sales | 4647.26 |
Total unsold stock value | 1426.05 |
Total Shareholder funds | 3,256.34 |
Closing bank balance | 2065.56 |
Outstanding loan | N/A |
Company performance
Round 1
Based on the findings of round 1 it was found that all the cars manufactured or proposed to be manufactured were sold by the company mainly because of its design and the entry of a new model with more efficient emissions and fuel use were introduced to the market. Initially, both the hatchbacks were introduced in the market because of their demand in the market. In addition, they aim is to meet a profit margin as met at £846.25m after the deduction of costs needed in manufacturing and production for the vehicles against the totals sales met. However, a loan amount of £500m was taken for the instalment of the factory and other overhead productions. As per the accounts, the revenues generated from the overall process was £2616.53. In addition, the productivity level with respect to cars/worker/year was 31.35 for round 1. As compared to its competitors the company has been performing well because during its 1st round both the cars shared around 3% of the total hatchback type vehicles. According to Johnson, (2012) automobile companies that invest in the development of designs and efficiency of fuels as well as low, carbon emissions receive more attention from the particular set of consumers. This helps in achieving a quick and faster market share in the market.
The major competitors of the case company are Hyundai, Toyota and others who are also developing vehicles with low or zero carbon emissions and high-tech design vehicles. Again, with respect to the vehicles produced and sold it was found that the company was able to sell all the cars they manufactured led to the total sales of £2850.84m and the gross margin for both cars is around 50%. The gross margins being high for both the models at 28% and 34% respectively for Apex and Eternal respectively, it may be stated that the sales revenue gained is high after the cost of sales. A positive and high rate of gross margins means the company is performing good for starters and may have the potential to improve this further with increased expenditures in designing and R&D for meeting the goals of zero-emission vehicles (Quinn, Zimmerle, and Bradley, 2010). However, for pound 2 the business found that the demand for SUV type cars was increasing and therefore, they also started to invest in the manufacturing of another model named ‘Tangent.’ However, Quinn et al. (2010) also states that the gross margin usually falls over time because of the increased costs of R&D in manufacturing of hybrid cars or low emission cars as well as sustainable production of cars.
Figure 1: Findings from round 1
Round 2
As for round 2, all the target products of the three models of cars were met by the company at the productivity of 52.75, 9.32 and 114.40 cars/worker/year for Apex, Eternal and Tangent respectively. The productivity of Apex and Eternal also increased with added labour and labour costs for both cars. However, the market share decreased for both the models of the car even though the overall sales increased by £3655.84m and reporting a gross profit of £1511.80m with the introduction of the new model of vehicle. There was no report of factory sale loss and post taxation profit was recorded at £775.19m whereby pre-tax profit was £994m. Furthermore, it was also found that both Apex and Tangent sold all the cars with zero in-stock but Eternal sold only 15191 with an in-stock of 5779. As compared to the other SUVs present in the market like Range Rovers and Jeep and BMW, the current model of Tangent has performed very well considering that the model was launched the first time with heavyweight companies and all the vehicles manufactured were sold. Again, the main reason that revolves around the increased sales of the car especially the SUV is because of its design, price, as well as the sustainability of the vehicles, manufactured. The company has been investing a lot in its R&D as well as the design of the car. According to Palmer et al. (2018), it was stated that the perceptions of the customers with respect to the purchase of SUVs are changing, and SUVs are less fuel-efficient in general. SUV owners look for more sustainable and compact designs that have good efficiency of fuel, mileages and emissions amongst other features. This may be one of the reasons why the case company has been able to sell off all its cars especially the SUVs.
On the other hand, the company failed to sell off 5779 Eternal model cars which are basically from the luxury segment which may be linked to a study that stated that people prefer more sustainable and efficient cars over luxury cars which are less efficient but highly-priced (Okulicz-Kozaryn, Nash, and Tursi, 2015). This is of the fact that Eternal is the most costly car that the case company sells against its two other models and maybe the company may have to rethink its promotional strategies used in the effective selling of the cars manufactured for the next round. Even though the overall sales and revenues may have increased to £3589.68m from round 1 this may be mainly because of the sales of SUVs. The company may also rethink its position even though the gross margins from the sales of the three models of vehicles are above 30%.
Figure 2: Findings from round 2
Round 3
In round 3, the model price for all the models of cars was kept the same at £24000.00m, £80000.00m and £15000.00m for Apex, Eternal and Tangent respectively. On the other hand, comparatively the sales rose to £4773.93m from round 2 and round 1 at £3655.84m and £2850.84m respectively. This means the company has been performing well with respect to the pricing strategies used and the promotional strategies used by the company. On the other hand, as compared to sales in round 2, this time the company sold all the remaining stocks, as well as newly manufactured cars of Eternal model but in-stock for Apex, was 3917 and Tangent was 57956. The market share for Apex again increased to 2% for round 3 but for the other two models, it remained approximately1% each. Furthermore, the gross margin from Apex remained stable but the same decreased by 39% and 34% for Eternal and Tangent. Even though a large section of the workforce was shifted to manufacture and boost the sales of SUVs, the plan failed but on the other hand, the sales of the luxury type of model were effective and reduced its workforce as the company had to sell remaining cars from round 2. In addition, the gross profit also increased for round 3 by £1894.82m because the cost of sales was reduced by £2879.11m. This is again because the company did not have to apply added costs to manufacturing for the 5779 Eternal car model (in-stock from round 2). Again, the revenue was recorded at £4682.03m whereby tax payments resulted at £218.64m and profit post-tax payment was £1030m.
In addition, it is also evident from the cost analysis that labours costs and costs of designing and materials costs had also increased. This may be because the company is constantly involved in improving the efficiency and features of the vehicles as well as aiming towards a low emission model. In this regard, Oshiro and Masui, (2015) informed that the costs of R&D and low emission vehicles are high due to the use of high tech technologies and prototype manufacturing to explore the true efficiency then comes costs of testing the vehicles and then specific design to reduce battery usage and others. This may be one of the reasons why the costs of designing and labour costs had increased in round 3 as compared to rounds 2 and 1. However, the company’s idea to keep the prices of the vehicles the same even if the designing costs and labour costs increases may be a promotional strategy to compete in the market. On comparing with its rivals the company has been able to gain a market share for the small segment car by 5.78% which is the target of the company but has not been able to do the same in case of large and luxury.
Figure 3: Findings from round 3
Round 4
The 4th round is the last round of the stimulation and based on the promotional strategies and pricing strategies as well as the manufacturing and production strategies adopted, the company’s sales reduced by 5% at £4647.26m as a result the gross profit also decreased to £1654.78m. Again, it was found that all the small model cars of Apex were all sold and as a result, it maintained its market size of 5.19%, but in the case of Eternal only 13542 were sold out of 20970 and 85502 were sold out of 83000 (including round 3 in-stock). However, the reduced sales and revenues as compared to the previous rounds are contributed by the reduced production of all three models of cars. This is further supported by the increased design and labour costs as the company is focusing more on R&D and sustainable development of the vehicles and by reducing the production will help them to increase the gross margin. The gross margin for each of the models remained at 39% for Apex, 35% for Eternal and 30% for Tangent. Pre-tax profit was £1049.29 whereas post-tax profit was £818.45m which also decreased from the previous rounds. These may be the strategic move of the company to ensure that the company can focus more on its sustainable development as well as a zero-emission plan or they may also be looking to develop vehicles in the electric segment and therefore may have started to reduce the production of conventional cars and investing more on electric vehicle manufacturing and production.
In this regard, Moon et al. (2018) informed that the demand for electric and hybrid vehicles has been increasing because more people are becoming aware of environmental conservation and pollutions and companies are starting to R&D on more effective batteries and charging stations which are the current challenges to the electric and hybrid vehicle segment. Therefore, to be in competition with rivals like Hyundai and Tesla, the company has to ensure that the vehicles made are at par or more developed than the high performing existing hybrid cars (Qawasmeh et al. 2017). The company has to now look for different technical aspects as presented by Qawasmeh et al. (2017) as the battery performance, technical characteristics, safety of the car, lifecycle of the batteries and others to gain a competitive advantage.
Figure 4:Findings from round 4
Critical reflection
Introduction
The team has used financial planning and decision making for ensuring that the business operations of the automobile company are sustainable and well prepared for profit generation. The proper evaluation was done to ensure that the stakeholders are positively affected due to the decision-making made by us. The internal stakeholder group considered in the decision making and evaluation consisted of the employees and the investors (Andriof & Waddock, 2017). On the other hand, the customers and the regulators were the external stakeholder groups that were paid attention to while making responsible business decisions. The decisions for operations were taken by keeping in mind the competitive strategy of the company to gain the maximum market share. The team members had undertaken the decision to implement a hybrid strategy as per the Bowman Strategy Clock for providing high value to the customers compared to offering the automobiles at lower prices.
Selection of internal stakeholder
This operations management decision to maximize the value for the customers while keeping the prices of the vehicles low was taken to enhance the prospect of increasing sales and credibility of the company in the market. This was done as a strategy to be used for marketing and increasing the sales of the vehicles and attracting more investors to invest in the company due to the possibility of getting more shares and dividends (Kannan, 2018). Proper financial planning was also done to eliminate the redundant cost of the business and optimise production efficiency for making full utilisation of the available capital. Decisions related to the design of the vehicles were made by keeping in mind the target market and the possibility of maximization of sales in terms of quantity for gaining better profits. The decision of pricing the vehicles like Apex Eternal and Tangent was done according to the target market and features and performance. The pricing decision of the above-mentioned car models was made at GBP 24000, GBP 80,000 and GBP 15000. Focus differentiation was also made applicable to the Eternal model. This is because the model belongs to the luxury segment and has additional dedicated features for the comfort of the passengers. The decision making of the company to provide additional value in all the cars along with providing focus differentiation in the luxury model ensure that the rate of research and development was enhanced in the company (Bratton & Gold, 2017).
The decision of the company to improve the build quality of the vehicles along with engines having m880 emissions created the scope of implementing the human resource management decision of providing training to the employees. As a team, we had undertaken the decision of enhancing the morale of the employees for increasing the satisfaction of the workers and enhance the overall organisational productivity (Mikkelsen, Jacobsen, & Andersen, 2017). The human resource management decision of recruiting qualified workers was done to assuring the high build quality of the vehicles and adequate safety features. The internal stakeholder group consisting of employees and investors were benefited due to the decision making of the company as we employed 2700 skilled workers for the medium-range vehicles along with providing 1300 skilled employees for the luxury segment vehicles (Menges, Tussing, Wihler, & Grant, 2017). The company has taken measures to increase the productivity and efficiency of the employees by investing in automation. This was done to increase the production capacity and reduce the market time of the products, which also benefited the company to attract more investors as they could get earlier returns.
We have decided of investing in skill development and training of the workforce as they are the internal stakeholders of the company. A financial investment of GBP 16.5 million was also meet for continuous training of the employees and providing them with adequate skills for managing automation and increasing performance efficiency and productivity (Kearney, 2018). The HRM decision of paying the workers more than the basic minimum wage was made for increasing their motivation to work. The factor of extrinsic motivation was aimed while providing continuous training and higher than market wages so that the employees remain satisfied and reduced absenteeism.
The organisational investment in automation as a part of research and development was made to enhance the credibility of the company and portray the farmers as capable of producing more units per day. The financial investment was made on the design enhancement and features of the vehicles to give them a facelift for increasing the attractiveness for influencing customer purchase intentions. This was also done as a strategy to attract more investors towards investing in the company for the medium range and luxury vehicles as they had more possibility of sales and acquiring market share than the competitors (Rayton & Yalabik, 2014). The decision was made to ensure a long-range electric car was manufactured in the company as a part of the continuous improvement process. This was done by keeping in mind the long-term industry trends and customer preferences. This was integrated into the operations of the company along with the R&D with the prospect of better preparing the employees for the future operations and meeting the demand of the customers in the future. This was also a beneficial decision for the investors of the company as the prospect of the company has increased thereby enabling them to attract more investors. This decision had been taken to keep a steady flow of finances in the organisation and meet the expectations of the customers. The operational decisions relating to the design and features of the economy, mid-range and luxury car was taken based on the market value and target customers. The internal stakeholders like the customers and the investors of the company were considered deeply while taking the decision based on ensuing maximum value and meeting their requirements. Motivational aspects for the employees were considered based on the intrinsic and extrinsic factors for retaining them through continuous training and higher than market wages.
Selection of external stakeholder
Our team has utilized the knowledge of financial, operations, marketing and HRM management for formulating effective decisions that have influenced the external stakeholders to be involved with the service provided by the company. The main external stakeholders are considered as customers and the regulatory body. The main core values offered by the companies consist of integrity, innovation, tenacity and teamwork approach for attracting most of the consumers (Renatus&Geldermann, 2016). We have applied a diversified range of pricing strategies for attracting most of the customers of different age groups. For example, a penetration pricing strategy has been applied for Apex cars which has reflected that the price of vehicles is lower than that of competitors with ensuring quality. It would also attract the customers for gaining the service of the firm which has demonstrated the success of the strategy. On the other hand, the premium pricing strategy has been adopted for eternal cars that reflect higher prices products with ensuring the ultimate quality of the product. Following the prices would indicate the quality which has enabled the customers to accomplished higher perceived brand value (Dessart, et al., 2015).
As the customer of luxury cars would go for the premium model without having price concerns which has been considered by us for deciding the pricing strategy. The regulatory body has also established a particular range of prices for maintaining healthy conditions in the market. So, the price has been determined concerning following those factors (Dellermann, et al., 2019). We have also included the concern of zero-emission design which would also provide financial stability and advantage over the competitors. The company has also taken the initiative of brand quality improvement, zero-emission engine, facelift, and long-range electric cars which have indicated the requirement of proper financial allocation to be spent in the research and development process of the company. The customers would be added value through offering innovative products and services which has highlighted the connectivity between the customer and financial decisions for investing in a particular field.
The operation of the company is also inclined in such a direction that it would follow the guidelines of the regulatory body and ensure sustainability (Dellermann, et al., 2019). Moreover, the rising operational cost would also raise the price of the final product which has indicated the requirement of controlled resource allocation and monetary spending for completing the work process. The firm has also planned to introduce the zero-emission engine which supports the environmental concern and the guidelines of the regulatory body. On the other hand, the decisions regarding model 2 comprise extended servicing or warranty, memory front seats along automatic transportation, which has raised the morale of customers for availing the services. The inclusion of a rearview camera, exciting roof colour and wireless phone charging refers to the extra facilities that are to be followed for meeting the contemporary technology trend (Akinci& Sadler‐Smith, 2019). I have researched the market for assessing the demands and preferences of customers, which would help the authority to introduce the product and service in that direction.
The marketing operations are formulated in a particular direction that it would reach most of the customers effectively. I have learned the framework of the marketing mix, which described an important component of marketing such as product, place, price and promotion as it, would connect the customer with the company offerings. Moreover, the modern trend of mediums is also evaluated for selecting the best suitable one to promote the products and services (Cánez, et al. 2000). We have decided to apply different promotional strategies for two cars, which comprise television, digital media, dealer incentive, and promotional offers. The customers are directly influenced by a particular decision regarding company operations. I have also evaluated and determined promotional percentage, which indicates that the current promotional strategy influenced the significant number of the targeted audience. The mindset of young age citizens towards the digital medium is also demonstrated which has assisted the management to formulate the digital strategy based on the principles. While conducting the promotion, all the information provided in the advertisement must comply with the services provided (Dessart, et al. 2015). Such a decision would help the management of the firm to follow the regulations and standards set by the regulatory body of the business. Due to the increasing use of social media and the higher engagement of customers with social media, we have identified the importance of social media marketing (Abdullahi, et al., 2017). I have also evaluated a diversified range of marketing techniques that would be cost-effective and of a higher span. The improved and diversified promotion strategies would raise the customer base of the company, which has reflected that the promotional decisions influence the external stakeholders.
Evaluation of the critical reflection
The human resource management decisions of the business have also influenced the business stakeholders directly as the employees are the backbone of the company and focusing on their management must be effective (Sarvaiya, et al., 2019). The compensation and other facilities of both the skilled and unskilled workers must comply with the standards of the industry. The decision of the business would ensure the following of regulations and aligned with the legal concern. The arrangement of the training and development program would also improve the capability of business and provide quality products to the customers. Such a decision would influence the buying decision of customers as the sales executives would need to assess the demands of the customer and offer quality products to the customers (Barclay & Kang, 2019). It would also attract the customers for gaining the service of the firm, which has demonstrated the success of the strategy. I have also studied different theories regarding HRM practices that must need to be focused on and incorporated for adding value to the executives and ensure the growth of business values. The principles of regulatory bodies are also addressed by inclining the strategies based on business operations. I have researched the market for assessing the demands and preferences of customers, which would help the authority to introduce the product and service in that direction.
Conclusion
The main aim of the report was to explore the findings and the understandings from the stimulation game conducted to construct Cygnus motors. Based on the study findings it was found that the target of 5% market share was not achieved due to certain reasons, but the sales of the vehicles had increased and the revenues too. Furthermore, comparisons of the key performance measures for all the reports were presented. The team had used the financial concepts and the operational knowledge for deciding on investing in training and development of the employees for improving their productivity. Value-added features were integrated into the vehicles for operational and marketing finesse for attracting more investors. Additional HRM investment was done to ensure that the employee morale is enhanced by paying them more than market rates for their performance. We had assessed the demands and needs of the general customers of the automobile sector which are also integrated with strategic decisions taken by the company. Moreover, the pricing strategy of the company directly influences the customer buying behaviour which is needed to be evaluated for ensuring business success.
Team performance
The team simulation process examined the effectiveness of the group work that identifies the strengths and weaknesses of the organisation. A total of 4 team members has been selected within the team, where their team roles were being divided based on their skill sets and competencies. I was appointed as the team leader during the simulation where my prime responsibility was to manage my team along with directing their actions. The first stage of team simulation was based upon describing the situation, we as a team had gone through the financial statement of the organisation which helped us in gathering important information that includes which model of Cygnus Motors generated higher market share for the organisation (Markkanen et al. 2020). The first stage of the simulation activity helped us to identify that the Apex and External model of Cygnus Motors helped the organisation in sustaining its brand and earn a higher reputation within the competitive business environment.
Examining the simulation process I noticed that most of my team members were stating that they need to develop the profitable models of Cygnus in order to grow their strength and earn better market share and profitability. Although my personal feelings were different from my team members because I thought that we as a team need to consider the least profitable model as well in order to identify the issues and eliminate them to foster growth opportunities (Tanaka and Koide, 2018). The collaborative nature of the team was a positive point as it helped in generating new ideas and suggestions through which the simulation activities were carried forward in an effective manner. The limitation that I found out during the simulation activity among the team was their neglecting behaviour towards taking any risk towards improving the situation that faced any issues and challenges.
During the analysis section within the team simulation process, I noticed that all the team members were active participants where they were eagerly contributed to the game. All of the participants examined, analysed, and determined ideas that significantly contributed to the development of the financial ratios and statements for the Cygnus organisation. Information related to data, statistics, and financial information of the organisation is being undertaken within the game simulation process so that better results can be generated for making the simulation process successful. Although I noticed a challenging situation that prevailed within the simulation activity, it includes rising conflict of interest and personality clash among the team members (Wain, 2017).
All of the team members wanted their ideas to be considered during the simulation process so that their personal status can be grown. I being a team leader took control of the situation and directed the team to work in a collaborative manner so that the common objective of the simulation game activity can be achieved. The conclusive statement drawn out of the simulation activity pointed out the positive team atmosphere and growing financials of Cygnus motors. The team also developed an action plan towards undertaking activities such as an analytical tool and managing a timeline for particular activities that increase the competencies of achieving positive results and success (Sicora, 2019).
Evaluating my personal role during the team simulation process I noticed that I have gained my leadership and communication skills. I was being appointed as the team leader within the simulation process, where I initially recognised that I need to divide the roles and responsibilities of the individuals based on their skill sets (Johnston, 2017). My first and foremost task during the game simulation process includes identifying the competencies of the individuals and make them work based on their skill sets so that better results can be generated. Furthermore, I as a leader have also developed my communication skills where I actively took participated during the simulation process. I encouraged the team members to put forward their ideas and suggestions based on which I undertook decisions that best fit according to the situation (Knott & Scragg, 2016). I also faced challenging situations during the team simulation process that includes growing conflicts of interest among the team that increased the challenge of carrying out the simulation process in an accountable manner (Hendricks, 2017). Furthermore, I also faced challenges in terms of convincing the team to undertake a risk situation in order to identify situations and possibilities that earn higher success and output for the team simulation process.
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