6
Phrama Sim Report Week #11
Thomas Liquori
Digitally signed by Thomas Liquori DN: cn=Thomas Liquori, o, ou, email=thomasliquori@a Thomas Liquori ol.com, c=US Professor Villegas (MGT 425) Date: 2011.04.21 9/12/2009 18:47:38 -04'00'
Phrama Sim Report
2
1) Present five most important decisions you have made? Why were they important? What determined you to make those decisions?
In my opinion one of the most important decisions that I made during the 10 periods of the pharma sim stimulation was to increase the manufacturer suggested retail price based on the market outlook. In each period of the market outlook, they would give information about the average price increase to an inflation rate. This helped guide me to a price increase as each period progressed. My second important decision also came from the market outlook, which gave information about advertising and promotional spending. I based my increase or decrease of my advertising and promotion expenses from this information. But there were times where I did not use the suggested information from the market outlook, and it seemed like I got better results when I used my own judgment.
Another important decision that was made during the pharma sim was the increase of my sales force. During each period I would look at the market outlook to see what would be the best decision for my sales force in order to increase my profit margin and stock price. I took into consideration the information the market outlook gave as well as my own experimentation to my sales force. I have to say, the sales force is a great key to succeeding in the pharma sim. The market outlook was very helpful because it gave detailed information about which sales force was strongest in that particular period and how by how much it grew by. My forth important decision I made during the pharma sim stimulation was the introduction of a new product. I introduced the All-round 12+ hour multi capsule, and I must say, the introduction to this product caused my companies profit and stock price to plummet. I quickly removed this product from the company and focused on the All-round 4 hour multi liquid formula which will be discussed more in the next question on the next page.
My fifth and final important decision that I made during the stimulation would be the reformulation of my product. During the first period I changed the formulation of the All-round 4 hour multi liquid formula because I thought it would be more successful. As I became brand Professor Villegas (MGT 425)
Phrama Sim Report
3
manager and had the chance again to reformulate the product, I changed it back to the original formula which will be discussed further in the next question.
2) In retrospect, are there any decisions you wished, you have not made? If you could, what other decisions would you make instead?
There are a few decisions that I wish that I had made. The first decision would be reformulating the product during the first period. I only did this because after reading the pharma sim manual, it stated that not everyone liked and would purchase a product with alcohol in it to make them sleepy. I felt that the product I was selling was missing out on a huge part of the market being that it is usually only taken at night before bedtime to help people sleep better. I took out the alcohol, and my profit started to decrease and my stock started to fall. I thought throughout the next couple of periods I would be able to market the product and bring it back to life when I introduced the All-round 12+ hour multi capsule in period four. This was not the case at all; I only introduced the product because of what was being said in the manual of how people would like a long term product that works all day and night. Once I introduced this product, my company’s gross profit and stock really started to go into a downward swirl, my net income plummeted from period four to period six by approximately 60 million. I immediately had to make a choice of whether or not to keep the 12 hour product or to get rid of it from the All-round line. I chose to get rid of it, and the product was discontinued in period six.
After the discontinuation of the product I had to really focus on my All-round 4 hour multi liquid formula which was the only product that was a cash cow at that time (during period six under the narrow portfolio graph). If I could go back and make a change to this product is to keep it the way it was formulated when I started the stimulation. I should have not messed with the top selling product that was already doing well, but then again I took the advice the pharma sim manual to help me make a decision of what I wanted to do in the long run with this stimulation. Professor Villegas (MGT 425)
Phrama Sim Report
4
3) How well did the company do? What happened to market share and profits? What caused the changes you observed?
Overall, in my opinion, the company had a very bumpy ride throughout the stimulation. During the first period, I decreased all of my advertising and promotions to nearly zero, and my net income and stock prices soared to almost $60. After the next two or three periods and the experimentation with the formulation of the All-round four hour multi liquid formula, my stock started to fall a bit. I increased my advertising and promotions and raised my manufacturer suggested retail price each period, but I could not seem to get back to the uprising I was on during the first period. After the introduction of the 12 hour multi capsule, the company was really heading downhill. I tried to advertise and promote the new product maybe a little too much and in turn really took a chunk of my operating expenses and having an impact on my net income, not to mention the impact it had on my stock price.
After the discontinuation of the 12 hour multi capsule, there was a glimmer of light that the company was starting to recover. I focused on the main product of the company (Allround four hour multi liquid) and cut back a little on my advertising and promotion. I gradually increased my sales force and continued to increase the price of the product based on the average cost due to inflation and of course based on what the market outlook for the period was telling me, and my stock and net income started to rise little by little. Towards the end of the stimulation I found that what worked for me in a couple of periods was to decrease advertising and promotions to almost nothing. By doing this for some reason raised my stock and net income tremendously. So I would do every other period pretty much, but still focusing expanding my sales force and retail price, as well as giving greater discounts for wholesale purchases. If I had a few more periods I feel I could have gotten the company back to a more successful state, but I learned from my mistakes in the stimulation and I see that running a company is not as easy as it looks. Of course I feel that I can do and it can be done since I currently run my own online business, but it is nothing compared to running a multimillion dollar company. Professor Villegas (MGT 425)
Phrama Sim Report
5
In conclusion, I feel that this was a great class that I learned a lot from and will take with me out into the real world upon graduation in April. It taught me a lot in reference to making key decisions for a company, and every decision will have either a negative or positive effect. It also taught me how decisions made for a company will either make or break a firm. But there is always room for improvement and managers do learn from their mistakes and become wiser with more experience. I hope that I do get a chance to work for a big company someday and I will take every experience that I have learned so far to help me make all the best decisions that need to be made to make the company more successful than it already is.
Portfolio Matrix from last decision:
Professor Villegas (MGT 425)