McGraw-Hill/Irwin ©2009 The McGraw-Hill Companies, All Rights Reserved

The Business Strategy GameThe Business Strategy GameOverview and OrientationOverview and Orientation

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What Is The Business Strategy Game All About?

The marketplace is worldwide—production and sales activities can be pursued in North America, Latin America, Europe-Africa, and Asia Pacific

There are 12 market segments—4 geographic segments each for branded footwear sales to retailers, for online footwear sales direct to consumers, and for private-label sales

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Your Company’s Situation

All companies start out on the same footing—with 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), an ROE of ~17%, and a solid B+ credit rating.

Your company is in sound financial condition, is performing well, and its products are well-regarded by the buyers of athletic footwear.

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The Decisions You Will Be Making

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 company’s

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

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Competition Is Head-to-Head:Company Against Company

The head-to-head competition among companies to persuade consumers to buy their brand of athletic footwear is based on 10 factors: Price Number of models/stylesStyling/quality (S/Q) ratingAdvertisingSize of retailer networkCelebrity endorsementsDelivery timeRetailer supportMail-in rebatesShipping charges (Internet sales only)

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You Have Many Strategic Options

Company managers have wide strategic latitude in staking out a market position and striving for good performance. There’s 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.

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No One Strategy Is “Best”

Almost 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 each company’s strategy and decisions against the strategies and decisions employed by rival companies—there positively is no mystery “silver bullet” strategy or decision combination that players are challenged to discover.

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A Company’s 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 company’s 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.

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The Contest in the Marketplace Is a “Battle of Strategies”

Following each year’s decisions, you’ll 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.

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Outcompeting Rivals Is the Key to Market Success

You’ll have to stay on top of changing market and competitive conditions

Try to avoid being outmaneuvered or placed into a competitive bind by the actions and maneuvers of rival companies.

Make sure your footwear is attractively priced and competitively marketed.

While you are trying to win business away from rival companies, they are doing like wise.

It is the competitive power of your strategy verses the competitive power of rivals’ strategies that is the deciding factor in determining sales and market shares.

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It’s 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 game 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.

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Some Features of the Market and Company Environment

The industry setting in The Business Strategy Game is modeled to closely approximate the real-world character of the globally competitive athletic footwear industry.

Company operations are designed to be as realistic as possibleOperations are patterned after those of an athletic

footwear company that makes its footwear at company-operated plants.

All cause-effect relationships and revenue-cost-profit relationships are based on sound business and economic principles.

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How Company Performance Is Judged

Board members and shareholders/investors have set five performance objectives for the company:

1. Grow earnings per share at least 7% annually through Year 15 and at least 5% annually thereafter.

2. Maintain a return on equity investment (ROE) of 15% or more annually.

3. Maintain a B+ or higher credit rating.4. Achieve stock price gains averaging about 7%

annually through Year 15 and about 5% annually thereafter.

5. Achieve an “image rating” of 70 or higher (a company’s image rating is tied to the styling/quality of a company’s branded footwear, market share penetration, and its actions to display corporate citizenship and social responsibility).

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Scoring Weights

The weights that will be placed on your company’s 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%

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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 company’s performance stack up against the company with the best EPS, ROE, stock price, and image rating and against an industry-best A+ credit rating?)

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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 Player’s Guide—its 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 Report—this quiz serves as a check to see if you understand the numbers and how they are calculated. Time Limit = 75 minutes.

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Tips for Success

Make use of the short Video Tutorials

Whenever you want more in-depth explanations and details than contained in a Video Tutorial, click on the Help button at the top of a decision screen or report page.

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Tips for Success

Follow the Suggested Decision Procedures (see the Support menu on your Corporate Lobby page)

Learn as much as you can from the practice decision(s)—the chief purpose of the practice decisions is to help you become fully acquainted with All the menus The decision entriesThe on-screen calculations that appear when you

make a decision entryThe information that appears on all the various

reports that become available after each decision round is complete

The more you learn from the practice rounds, the better your chances for getting off to a good

start!!!

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Some Procedures

Check the Decision Schedule link on your Corporate Lobby page for the dates and deadlines for the decisions. The decision deadlines are strictly enforced, since the results are processed automatically on the BSG servers minutes after the deadline.

The results of each decision will be available online about 15-20 minutes after the decision 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.

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PC Requirements and Mechanics

Virtually all BSG activities take place online, on a PC that must be installed with (1) any Web browser (such as Internet Explorer, Safari, or Firefox) and (2) the Flash plug-in, Version 10.0 or later.

BSG-Online automatically transfers the needed

software from the BSG server to the PC you are working on very quickly.

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.

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My Final Advice

Run the company in a serious, professional manner. You will be held fully accountable for the results of your actions—just 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” usually 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 or extreme decision entries.

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You are a Team of Executives