Introduction to Markstrat3

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STRATX Licensing Division
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Why simulation?

• Adult learning principle 1
• Adults learn best by doing (not by listening,
  seeing, or by reading).
• Non-destructive and low risk exercise
• Time compression
• Widely varying environmental conditions can be
  presented

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How realistic is the simulation to real life?

• Quite realistic, but not perfect
• Need to adhere to some rules
• Underlying models based on academic research
• Some experimentation is possible

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Markstrat is a simulation designed to focus on
strategic marketing issues

• Understanding customer needs
• Long-term perspective
• Marketing as profit center
• Competitive environment
• Marketing strategy is based on segmentation,
  positioning, and resource allocation...
  marketing mix decisions are secondary

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The "Markstrat World a large territory with a
highly developed economy

• The Markstrat World
• Population 250 million
• Currency Markstrat Dollar ()

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The basic scenario begins with firms starting in
different positions
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Each firm can compete in TWO product markets

• independent
• not substitutes
• not complements

VODITES
SONITES

• Maximum 5 brands/firm marketed at a time

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The Sonite market is already developed, each
product having 6 determining product
characteristics
Volume
Weight
Design
Index
Kg
dm3
10 - 20
3 - 10
20 - 100
Base Cost
Power
Max. Frequency
W
kHz

5 - 50
5 - 100
min. 10
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Vodites will likely also have 6 main physical
characteristics, but the market is as yet untapped
Diameter
Max. Frequency
Autonomy
m
mm
kHz
5 -100
5 -20
10 -100
Base Cost
Weight
Design
Kg
Index

3 -10
10 -100
min. 10
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It is easy to recognize the origin of the brands
from their names
S
I
B
I
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Sonite customers have traditionally been
classified into 5 segments...
Singles
Professionals
Si
Pr
Buffs
High Earners
Others
Hi
Bu
Ot
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...whereas initial studies for Vodites have
pointed to a different segmentation scheme
Typical segment size evolution over time
sales
Followers
Early adopters
Innovators
time
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Sonite Vodite customers have the choice of
purchasing through 3 distinct distribution
channels
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Summary of Markstrat World environment
Market growth
Technology
Economic environment
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Your objective in managing your company is to
maximize your Share Price Index

• To do that, you will have to optimize
• Market share
• Sales growth
• Net contribution
• Cumulative net contribution
• RD investments ...
• ... but the main objective is to LEARN !

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You will need to do a certain amount of analysis,
before setting a strategic direction for your firm
Strategic Options
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Market research studies provide market data ...
it is up to you to prioritize, digest and
interpret them

• Consumer survey
• Consumer panel
• Distribution panel
• Semantic scales
• Multi-dimensional scaling (MDS)

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Market research studies provide market data ...
it is up to you to prioritize, digest and
interpret them (cont'd)

• Industry benchmarking
• Market forecast
• Competitive advertising
• Competitive sales force

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Market research studies provide market data ...
it is up to you to prioritize, digest and
interpret them (cont'd)

• Advertising experiment
• Sales force experiment
• Conjoint Analysis

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Once your strategy is clear, you should proceed
to make a number of tactical decisions each year

• Production Planning
• Inventory disposal
• Pricing
• Mass communication
• Sales force Distribution
• Market Research

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Your production department will automatically
adjust production levels up to 20 ( or -)
against your plan.
MarketDemand
(assuming zero inventory level)
Inventory build-up
Lost sales
Number of Units
Production
QP (1-20)
QP (120)
QP
Requested production level
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Comparison of purchase intent with market share
can give you a feel for the size of "lost sales."
Market Share
Purchase Intent
Lost Sales
-
?
competitors
order-book
?
lost to industry
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Pricing in Markstrat is fixed once a year
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Each firm receives a marketing budget for the
coming period, based on the previous periods
performance
Budget
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Brand results
CONTRIBUTION BY BRAND
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Company Performance
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The simulation starts at the end of the initial
period, the new management (you!) making
decisions for the next period
MS3 Pn1
...
START
MSPH
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The decisions for the first period are limited in
scope, so that your team can familiarize itself
with Markstrat

• Gather information
• Do not make any major changes in your firm's
  operation
• Do not introduce new brands,modify or withdraw
  existing ones
• Do not start RD projects
• Do not give perceptual objectives for advertising

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Organize yourselves and manage the group process
Information overload
Time pressure
Conflicting opinions
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When you return to your team room, the Main Menu
will be on your PC screen
Module Bar
Click here to switch to the decision mode
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After accessing the Decision Module Main Window,
you will start making decisions for the coming
period
Click here to access the Production, Price and
Advertising module
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Decisions on production, price and advertising
should be entered for each brand
Switch from Sonites to Vodites
You are making decisions for brand SEMI
Switch from one brand to another
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The sales force is organized by channel type to
better meet the specific needs of the channels
click here to normalize sales forceeffort to
100 in each channel
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Buying market research studies will help you make
sound decisions
Your selections update the cost of selection
automatically
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You can monitor the status of your decisions at
any time
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Don't forget to transfer your decisions ...
Step 1Click here to accessthe Interface Module
Step 2 Transfer your decisionsand hand your
data disk over to theAdministrator
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On your marks, get set, GO!

• Give a name to your company
• Respect the deadlines

Good luck!