The Business Strategy Game

1
The Business Strategy Game

• Orientation and Overview

2
What Is The Business Strategy Game All About?

• Its an online, PC-based exercise where you run
  an athletic footwear company in head-to-head
  competition against companies run by other class
  members.
• The marketplace is worldwideproduction and sales
  activities can be pursued in North America, Latin
  America, Europe-Africa, and Asia Pacific
• There are 12 market segments4 geographic
  segments each for branded footwear sales to
  retailers, for online footwear sales direct to
  consumers, and for private-label sales

3
What Is The Business Strategy Game All About?

• The industry setting is modeled to closely
  approximate the real-world character of the
  globally competitive athletic footwear industry.
  
• Company operations are patterned after those of
  an athletic footwear company that makes its
  footwear at company-operated plants.
• Cause-effect relationships and revenue-cost-profit
  relationships are based on sound business and
  economic principles.
• Company operations are made as realistic as
  possible and the functioning of the marketplace
  in The Business Strategy Game closely mirrors the
  competitive functioning of the real-world
  athletic footwear market, thus allowing you and
  your co-managers to proceed rationally and
  logically in deciding what to do.

4
What Is The Business Strategy Game All About?

• You and your co-managers have responsibility for
  managing all aspects of the companys operations.
  As a senior executive, you get to test your
  ideas about how to run a company (in as realistic
  a competitive market setting as can be created),
  and the live case nature of the simulation
  provides prompt feedback on the outcomes of your
  decisions.
• Your challenge is to craft and execute a strategy
  for your athletic footwear company that, when
  pitted against the strategies of rival companies,
  delivers good bottom-line results and builds
  shareholder value.

5
How Does The Business Strategy Game Work?

• Virtually all BSG activities take place online,
  on a PC that must be installed with both Internet
  Explorer and Microsoft Excel (either the 2000,
  XP, 2003, or 2007 versions).
• You can either use the same PC for all BSG
  sessions or you can use different PCs all that
  is required is an Internet connection, Internet
  Explorer, and Microsoft Excel.
• BSG-Online automatically transfers the needed
  software from the BSG server to the PC you are
  working on very quickly (within a couple of
  minutes even on a slow connection) when you exit
  a session, your work is saved and transferred
  back to the server.
• The last decisions saved to the BSG server at the
  time of the decision deadline are the ones used
  to generate the results.

6
How Does The Business Strategy Game Work?

• All companies start out on the same footingwith
  equal sales volume, global market share,
  revenues, profits, costs, footwear quality, and
  so on.
• Each decision period in The Business Strategy
  Game represents a year.
• The company you will be running began operations
  10 years ago, and the first set of decisions you
  and your co-managers will make is for Year 11.
• The company had Year 10 revenues of 238 million,
  net profits of 25 million (equal to 2.50 per
  share), had an ROE of 17, and a solid B credit
  rating.

7
The Types and Numbers of Decisions

• You and your co-managers will make decisions each
  period relating to
• Corporate social responsibility and citizenship
  (up to 6 decisions)
• Production of branded and private-label athletic
  footwear (up to 10 decisions each plant, with a
  maximum of 4 plants)
• Plant capacity additions/sales/upgrades (up to 6
  decisions per plant)
• Worker compensation and training (3 decisions per
  plant)
• Shipping (up to 8 decisions each plant)
• Pricing and marketing (up to 10 decisions in 4
  geographic regions)
• Bids to sign celebrities to endorse your
  companys footwear (2 decision entries per bid)
• Financing of company operations (up to 8
  decisions)
• Plus there is a screen for making annual sales
  forecasts and deciding whether to have inventory
  clearance sales

8
You Have Many Strategic Options

• Company managers have wide strategic latitude in
  staking out a market position and striving for
  good performance. Theres no built-in bias that
  favors any one strategy.
• Companies can pursue a competitive advantage
  keyed to low-cost/low-price or top-notch footwear
  features and styling or more value for the money.
  
• Companies can have a strategy aimed at being the
  clear market leader in (a) selling branded
  footwear to retailers or (b) selling directly to
  online buyers or (c) both.
• Companies can put as little or as much emphasis
  on producing private-label footwear as management
  prefers.
• Companies can focus on one or two geographic
  regions or strive for geographic balance.
• Companies can pursue essentially the same
  strategy worldwide or craft slightly or very
  different strategies for each geographic region.
  

9
No One Strategy Is Best

• Most any well-conceived, well-executed
  competitive approach is capable of succeeding,
  provided it is not overpowered by the strategies
  of competitors or defeated by the presence of too
  many copycat strategies that dilute its
  effectiveness.
• In other words, which strategies deliver the best
  performance hinges on the strength and interplay
  of the strategies employed by rival companiesnot
  on some mystery silver bullet decision
  combination that players are challenged to
  discover.

10
Competitive Variables That Determine Company
Sales and Market Shares

• Price
• Number of models/styles
• Styling/quality (S/Q) rating
• Advertising
• Size of retailer network
• Celebrity endorsements
• Delivery time
• Retailer support
• Mail-in rebates
• Shipping charges (Internet sales only)

11
A Companys Competitive Effort vis-à-vis Rivals
Is Crucial

• All the sales and market share differences among
  companies are attributable to differing
  competitive efforts on price, S/Q rating,
  advertising, models offered, delivery times,
  retailer support, and so forth.
• Hence, every companys strategic challenge is to
  craft a competitive strategy (consisting of its
  prices, S/Q ratings, advertising, models,
  delivery times, retailer support, and so on) that
  it believes will produce the desired sales and
  market share outcomes when pitted against the
  competitive strategies of rival companies, region
  by region.

12
A Battle of Strategies

• Following each years decisions, youll be
  provided with Competitive Intelligence reports
  containing information of the actions rivals took
  to capture the sales and market shares they got.
  
• Armed with this information, you will be in
  pretty good position to figure out some of the
  strategic moves that rival companies are likely
  to make in the upcoming decision period.
• Just as in sports where it is customary for every
  team to scout its next opponent thoroughly and
  develop a game plan to defeat them, you will need
  to scout the strategies of rivals, try to judge
  what they will do next, and come up with a
  competitive strategy of your own aimed at
  defeating their strategies and boosting your
  companys performance.

13
Outcompeting Rivals Is the Key to Market Success

• Youll have to stay on top of changing market and
  competitive conditions, try to avoid being
  outmaneuvered and put into a competitive bind by
  the actions and maneuvers of rival companies, and
  make sure your footwear is attractively priced
  and competitively marketed.
• Just as you are trying to win business away from
  rival companies, some or all rivals are certain
  to be actively striving to take sales away from
  your company.
• It is the competitive power of your strategy
  vis-à-vis the competitive power of rivals
  strategies that is the deciding factor in
  determining sales and market shares.

14
Its All About Developing Winning Strategies

• The Business Strategy Game is all about
  practicing and experiencing what it takes to
  develop winning strategies in a globally
  competitive marketplace.
• When the exercise is over, the only things
  separating the best-performing company from those
  with weaker performances will be the caliber of
  the decisions and strategies of the management
  teams of the respective companies.
• Its an exercise calculated to spur competition
  and to get your competitive juices flowing.

15
How Company Performance Is Judged

• Board members and shareholders/investors have set
  five performance objectives for the company
• Grow earnings per share at least 7 annually
  through Year 15 and at least 5 annually
  thereafter.
• Maintain a return on equity investment (ROE) of
  15 or more annually.
• Maintain a B or higher credit rating.
• Achieve stock price gains averaging about 7
  annually through Year 15 and about 5 annually
  thereafter.
• Achieve an image rating of 70 or higher (the
  image rating is tied to the styling/quality of a
  companys branded footwear and to its market
  share penetration).

16
Scoring Weights

• The weights that will be placed on your
  companys achievement of each of the five annual
  performance targets are as follows
• EPS 20
• ROE 20
• Credit Rating 20
• Stock Price 20
• Image Rating 20

17
The Two Scoring Standards

• Two scoring standards are used in calculating
  performance scores for each company
• The investors expectations standard (Did you meet
  or beat the annual performance targets for each
  of the 5 performance measures?)
• The best-in-industry standard (How well does your
  companys performance stack up against the
  company with the best EPS, ROE, stock price, and
  image rating and against an industry-best A
  credit rating?)
• The scoring standards are explained in the
  Players Guide and even more fully on the
  ?/Help screens for pages 1, 2, and 3 of the
  Footwear Industry Report.

18
The Two Quizzes

• There are 2 open book 20 multiple-choice
  question quizzes built into the exercise. The
  quizzes are taken online and scored immediately
  upon completion
• Quiz 1 Covers the Players Guideits purpose is
  to spur you to read and absorb how things work in
  preparation for managing your company. Time Limit
  45 minutes.
• Quiz 2 Covers the Company Reports and certain
  information in the Footwear Industry Reportthis
  quiz serves as a check to see if you understand
  the numbers and how they are calculated. Time
  Limit 75 minutes.
• Click on the links for the quizzes on your
  Corporate Lobby web page for more
  informationthe three sample questions for each
  quiz give you an idea of what to expect.

19
The Peer Evaluations

• At the end of the exercise, you will be asked to
  complete a 12-question evaluation of each of your
  co-managers and a self evaluation of your own
  performance.
• These are completed online and can be reviewed by
  clicking on the Peer Evaluation Link on your
  Corporate Lobby web page.
• The peer evaluations are for your instructor only
  and are completely confidential.

20
What You Can Expect to Learn

• Running the athletic footwear company in head-on
  competition with rivals will give you a chance to
  put into play the very kinds of things you are
  reading in the text about crafting and executing
  strategy in a globally competitive
  marketplacethere is a very tight connection
  between the text for the course and The Business
  Strategy Game.
• You and your co-managers will have to chart a
  long-term direction for your company, set and
  achieve strategic and financial objectives, craft
  a strategy, and adapt it to changing industry and
  competitive conditions.
• Youll have to wrestle with a full array of
  industry statistics, company operating reports
  and financial statements, and an assortment of
  benchmarking data and competitive intelligence on
  what rivals are doing.
• Youll have to match strategic wits with the
  managers of rival companies, "think
  strategically" about your company's competitive
  market position, and figure out the kinds of
  actions it will take to outcompete rivals.
• Learning to do all these things and gaining an
  appreciation of why they matter are the heart and
  soul of courses in business strategy.

21
What You Can Expect to Learn

• In addition, The Business Strategy Game is
  designed expressly to provide you with an
  experience that will
• Draw together the information and lessons of
  prior courses, consolidate your knowledge about
  the different aspects of running a company, and
  provide a capstone experience for your business
  school education.
• Deepen your understanding of revenue-cost-profit
  relationships and build your confidence in
  utilizing the information contained in company
  financial statements and operating reports.
  Youll see why you cannot hope to understand a
  companys business and make prudent decisions
  without full command of the numbersyou wont
  have to play BSG-Online very long to appreciate
  why shooting from the hip is a sure ticket for
  managerial disaster.
• Provide you with practice in sizing up a
  companys situation, making sound, responsible
  business decisions, and being accountable for
  delivering good results.

22
How Do You Register and Get Started?

• The registration process consists of five steps
• Step 1 Have your assigned company registration
  code handy (this code is used to put you into the
  database for this specific course and to certify
  you as a co-manager of your assigned industry
  and company). Your instructor provides this
  code.
• Step 2 Go to www.bsg-online.com
• Step 3 Click on the Create Student Account
  button and enter the company registration code
  provided by your instructor in the box.
• Step 4 Continue on to the next step of the
  registration process where you will need either a
  credit card or a Prepaid Access Code that came on
  a card bundled with your text.

23
How Do You Register and Get Started?

• Step 5 Complete the personal registration
  information (user name, password, and so on) and
  the credit card payment process (if not using the
  Prepaid Access Code on the card bundled with your
  textbook). The Web site for credit card payment
  is fully secured you will receive a receipt
  e-mail. If you have no credit card or Prepaid
  Access Code, the easiest way to complete this
  step is to arrange to use a friends or
  co-managers credit card and reimburse them
  directly with cash or a check.Once you are
  registered, you have full use of the student
  portion of the BSG Online Web site.

24
The Corporate Lobby Page

• Each time you log-on to www.bsg-online.com, you
  are automatically routed to your companys
  Corporate Lobby web page.
• The Corporate Lobby page is your gateway to all
  BSG-Online activities. Near the top of this page
  is a series of menu selections that provide
  instant access to all the necessary information,
  materials, and tools you will need
• The Players Guide
• Decision Schedule
• Assignments
• Support
• Company Name
• Below these menu items are (1) a Decisions and
  Reports box for accessing the decision entry
  screens and viewing reports, a message center
  box, and information showing the latest exchange
  rate adjustments, current interest rates, and a
  company performance scoreboard.
• You have anywhere, anytime access to your
  Corporate Lobby page from any PC that is
  connected to the Internet.

25
Creating a Name for Your Company

• Shortly after registering, you and your
  co-managers should decide on a name for your
  athletic footwear company.
• Your companys name must begin with the letter of
  the alphabet that you have been assigned. Names
  can be up to 20 characters. To name the company,
  click on the Company Name menu item near the top
  of the Corporate Lobby, screen and enter your
  companys full name in the space provided.
• All company names are public and appear in the
  Footwear Industry Report thus you should select
  a name that you are proud of and that reflects
  the image you want to project to your customers,
  shareholders, other company stakeholders, and the
  general public.

26
Some Procedures

• See the Decision Schedule link on your Corporate
  Lobby Web page for the dates and deadlines for
  the decisions. The decision deadlines are
  strictly enforced, since the results are
  processed automatically on the BSG-Online servers
  immediately following the deadline.
• The results of each decision will be available
  online about 15-20 minutes after the decsion
  deadline.
• You will be notified via e-mail as soon as the
  results are ready. At that point you can log-on,
  see what happened, and proceed with the next
  decision.

27
An Important Capability

• All company co-managers can access the latest
  decisions and results from any PC connected to
  the Internettheres no need to e-mail decisions
  back-and-forth to get things coordinated.
• Info on your Corporate Lobby screen indicates the
  last date at which a co-manager saved decisions
  to the server and whether other co-managers are
  currently logged on.
• All company co-managers can be logged on
  simultaneously on PCs at different locations (or
  side-by-side in a lab). Instant messaging and
  cell phones can be used to communicate
  back-and-forth.
• If another logged-on co-manager clicks on the
  Save icon and uploads new decisions to the
  server, you will be notified the next time you
  press the Save iconyou then have the choice of
  (1) overriding the co-managers saved decision
  entries by saving your decisions to the server or
  (2) importing the co-managers decisions onto
  your decision screens and overriding your own
  entries.
• Remember the last set of decisions saved to the
  server are
• used to process the results.

28
Tips for Success

• Follow the Suggested Decision Procedures (see the
  link on your Corporate Lobby web page)
• Use the practice decision(s) to become fully
  acquainted with all the menus and the
  functionality that has been built into the
  screens
• Make full use of all the Help sections for each
  decision screenthese provide full explanations
  of the factors surrounding each and every
  decision entry and provide all kinds of tips and
  suggestions to guide your thinking.
• Make full use of the Help sections for the
  Company Reports, the Footwear Industry Report,
  and the Competitive Intelligence Reportsthese
  screens provide essential details of what the
  numbers mean, how they are calculated, and how to
  use the information to good advantage.

29
Tips for Success

• Run the company in a serious, professional
  manner. The overriding purpose of The Business
  Strategy Game is to give you practice in making
  business decisions, learning to craft winning
  strategies in a competitive market, and being
  held fully accountable for the results of your
  actionsjust as managers in the real-world are
  held accountable for the performance of the
  companies they run.
• Be very wary of trying something that is
  imprudent or highly risky or un-businesslike
  (things that would get a manager fired in a real
  company).
• Students who resort to trying to game the
  system almost always shoot themselves in the
  foot.
• This is not the time to be a daring adventurer
  out to win some variant of a videogame by making
  wild decisions and testing the limits of the
  simulation.