The Business Strategy Game

1. The Business Strategy Game Orientation and Overview Dr. Bill Todorovic, Management and Marketing

2. What Is The Business Strategy Game All About? • The industry setting is modeled to closely to the real-world character • Company operations - athletic footwear company • Cause-effect relationships and revenue-cost-profit • Company operations mirror the competitive functioning of the real-world athletic footwear market

3. Your Role • You have responsibility for managing all aspects of the company’s operations. • 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.

4. 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, or 2003 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.

5. How Does The Business Strategy Game Work? • All companies start out on the same • Each decision period in The Business Strategy Game represents a year. • The company you will be running began operations 10 years ago • 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.

6. The Types and Numbers of Decisions You and your co-managers will make decisions each period relating to • Production of branded and private-label athletic footwear • Plant capacity additions/sales/upgrades • Worker compensation and training • Shipping

7. The Types and Numbers of Decisions You and your co-managers will make decisions each period relating to • Pricing and marketing • Bids to sign celebrities to endorse your company’s footwear • Financing of company operations • Plus there is a screen for making annual sales forecasts and deciding whether to have inventory clearance sales

8. You Have Many Strategic Options • 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 focus on different geographic regions or strive for geographic balance.

9. The Best Strategy • 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.

10. The Best Strategy • In other words, which strategies deliver the best performance hinges on the strength and interplay of the strategies employed by rival companies—not on some mystery “silver bullet” decision combination that players are challenged to discover.

11. 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)

12. A Battle of Strategies • Competitive Intelligence reports • Figure out some of the strategic moves they are likely to make in the upcoming decision period. • 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 company’s performance.

13. Outcompeting Rivals Is the Key to Market Success • Stay on top of changing market and competitive conditions • Try to avoid being outmaneuvered and put into a competitive bind • Try to win business away from rival companies • 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. The Business Strategy Game is all about • Practicing and experiencing what it takes to develop winning strategies in a globally competitive marketplace. • The caliber of the decisions and strategies of the management teams of the respective companies. • It’s 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 company’s branded footwear and to its market share penetration).

16. 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%

17. The Two Scoring Standards Two scoring standards are used in calculating “performance scores” for each company: • The investors expectations standard • The best-in-industry standard The scoring standards are explained in the Player’s 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 Player’s Guide • Quiz 2: Covers the Company Reports Click on the links for the quizzes on your “Corporate Lobby” web page for more information—the 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. Following Slides • Please refer to the following slides as reference material • Good Luck !

21. 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 marketplace—there 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. • You’ll 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. • You’ll 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.

22. 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. You’ll see why you cannot hope to understand a company’s business and make prudent decisions without full command of the numbers—you won’t 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 company’s situation, making sound, responsible business decisions, and being accountable for delivering good results.

23. How Do You Register? 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). • Step 2: Go to www.bsg-online.com • Step 3: Click on the “Student Registration” button and enter your company registration code in the box. • Step 4: Click that you are registering with a credit card.

24. How Do You Register? • Step 5: Complete the personal registration information (user name, password, and so on) and the credit card payment process (if not using a prepaid access code that came with your textbook). Rest assured that the Web site for credit card payment is fully secured; you will receive a receipt via e-mail and/or regular mail indicating payment has been made. If you have no credit card, the easiest way to complete this step is to arrange to use a friend’s or co-manager’s 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.

25. The Corporate Lobby Page • Each time you log-on to www.bsg-online.com, you are automatically routed to your company’s “Corporate Lobby” web page. • The Corporate Lobby page is your gateway to all BSG-Online activities. It has links to • The Main Menu for making decisions and viewing/printing the results • The Player’s Guide • The decision schedule • The two quizzes that are taken online • The peer evaluations that are completed online • The recommended decision procedures • Plus it shows the latest exchange rate adjustments, current interest rates, the availability of used plant capacity that can be purchased for immediate use, upcoming deadlines, messages, and log-on activities of co-managers. • You have anywhere, anytime access to your Corporate Lobby page from any PC that is connected to the Internet, so long as the PC is equipped with Internet Explorer and Microsoft Excel.

26. 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 company’s 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 link at the top of the Corporate Lobby, and enter your company’s 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, and other company stakeholders.

27. 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 in less than 1-hour following 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.

28. An Important Capability • All company co-managers can access the latest decisions and results from any PC connected to the Internet—there’s 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 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 icon—you then have the choice of (1) overriding the co-manager’s saved decision entries by saving your decisions to the server or (2) importing the co-manager’s 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.

29. 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 screen—these 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 Reports—these screens provide essential details of what the numbers mean, how they are calculated, and how to use the information to good advantage.

30. 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 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” 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.