Management Simulation Report

Introduction

Scenario B highlights three key aspects of a rental firm in Florida; they include the net income, Price history and the unit sales, which will assist the study to emerge with a concrete analysis. The net income section highlights 13 aspects such as the month of the year that the business was active, revenue from weekday rentals, revenue from Weekend Rentals Total Revenue, variable Costs, and Weighted Average Gross Profit Contribution. In addition, the net income section also highlights other expenses such as all the Weekday Contribution, Weekend Contribution, Vehicle Inventory Costs, Operating Profit Contribution, and Other Fixed Costs that the firm cannot avoid to pay. Lastly, this section highlights the Pre-Tax Profit that the firm made each month and the Accumulated Pre-Tax Profit.

It is evident that the firm earns a huge amount of pre-tax profit after the deduction of all the expenses although the lowest profit is experienced in the month of November to the month of January where the rentals were low. The firm experienced worse losses when the year began since the month of February and March indicate that the firm made losses of $4.99M and $4.48M respectively I believe this amount emerged from the reduction of the revenue that emerged from the reduction of the weekend rentals that reduced gradually in that period. The company started to stabilize in the month of May where it has an accumulated pre-tax profit of $ 515.28k and this grew in the following months to a high of $9.71M in the month of September where the company experienced high profits. The above information is highlighted in the graph below.

Results

Scenario

Month

Pre-tax profit of that month ($) (M)

Market share of that month (%)

B

July

2.82

67.03

August

2.82

67.03

September

2.82

67.03

October

1.58

67.36

November

1.00

68.09

December

1.00

68.24

January

1.00

68.33

February

-4.99

65.14

March

-4.84

63.25

April

2.83

64.97

May

4.51

67.83

June

4.51

67.83

July

1.43

68.06

August

1.38

68.20

September

1.88

68.08

The formulae of the market share is

Market Share = (Particular Company's Sales Revenue in Time Period X) / (Relevant Market's Total Sales Revenue in Time Period X) (Farris, 2010).

It is evident that the company has a large market share in the area since it maintains an average of nearly above 60% of the whole area. The company lost its market share by nearly 4% in February and March which indicates that the company was affected by this loss since it reported huge losses in that period. The correlation of the above information can be highlighted in the graph below


Discussion

Summary of overall strategic considerations

While playing the game, I used the market -oriented pricing after analysing and researching about the target market. This strategy puts emphasis on comparing the variations of prices in the market and setting the proper price for the rental (Courty & Pagliero, 2003). It is evident that the prices varied according to different areas and during the weekdays and the weekends.

Did you change strategies or maintain the same strategy throughout? If so, How and why? If not, why not?

I absolutely did not change the strategy that I had used for the game. This is because the strategy provided accurate results and is it was effortless to apply (Winer, 2005). Another reason behind the lack of change of the strategy was the consumer activities. This is because the consumers scan the market to compare prices and at the same time search for goods that are of the higher quality (Livesey, 2006)


Discuss how the following pieces of information provided in the ‘Analyze’ section help you determine your prices in Scenario B and Scenario C respectively (students may choose to address only the most relevant ones):

Price history

In the case study, the prices at the firm can be clearly identified since some are identical while others are not the same. The price history indicates the minimum and the maximum price of rentals. Through the analysis of the price history, individuals are able to determine the price range of rentals on both the weekdays and the weekends. The case study also highlights the difference in the price of the rentals in terms of the days of the weeks and months. The variation occurs because of the demand and supply. The variations ensure that the rental firms are able to increase their weekly, monthly and eventually the annual profit margin. It is evident from the case study that the rental firm relays on the price history financial statements to determine the prices in the present. A clear analysis of the Price history indicates that the price of rentals is higher in the weekdays through all the areas and drops during the weekend. This is a clear indication of a drop in the demand of the rentals during the weekend. Further analysis of the case study indicates the increase and decrease of the prices during different months.

Unit sales

The definition of a unit sale is the price in which a single rental sales. Analysis of the case study indicates the price of single rental sales at a higher price during the week than in the weekend. The unit sales also vary according to the months of the year. A clear example indicates that in Orlando, the unit sales at the beginning of the year were high then it slowly went down. In addition, as the year ended, the unit sale increased. This analysis clearly indicates the fluctuation in prices according to the demand of the rentals throughout the year.

Monthly net income

The monthly net income is the amount of money earned at the end of each month. This case study focuses on the pre-taxed profits earned from the monthly net income. Analysis of the pre-tax profits is useful in the determination of the monthly net income. From the case analysis, it is evident that at the beginning of the year, the rental did not experience any profits but as the year continued, its monthly net income increases. It later on declined because of the low revenue from the weekend rentals. It is evident that revenue largely affects the monthly net income because lower revenues lead to lower pre-taxed profits and lower met income.

Conclusion

In conclusion, it is evidence that the customers are extremely sensitive to prices of rentals and that their preferences may change with the changes in price. Another important lesson indicates the significance of price history in determining the price of rentals. Yes, these lessons are applicable in the air ticket pricing and the hotel because the hotel and air ticketing business comes in seasons just like the rental sector. A large number of individuals visits hotels and travel more during the weekends that in the weekdays. The adoption of the Market –Oriented pricing strategy is accurate and quick to apply.

The simulation experience relates directly to the teachings in class since some facts became evident as I carried out the simulation. Pricing is a valuable aspect in a business and managers have to be extremely cautious when establishing their prices since they relate directly to the amount of consumers who will require the services of the company.


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