Adviser : En-te Hsu Association Professor & Chairman Department of Accounting, Tunghai University

Student: Shang-Hang Chou Senior Student Department of Accounting & Business Administration, Tunghai University

Outline
I. Introduction ----------------------------------------------------------------1 A. Game theory From Wikipedia, the free encyclopedia B. Company background II. Case Study-----------------------------------------------------------------2 A. STEW LEONARDS DAIRY STORESatisfying the Supermarket Customer 1. BEGINNING THE BUSINESS 2. BUSINESS PRINCIPLE: SUPERMARKET SHOPPING SHOULD BE FUN 3. BUSINESS PRINCIPLE: LISTEN TO THE CUSTOMER B. Comment on the quality of Stew Leonards Business Strategy III. Application of Case Study with Co-opetition------------------------8 A. Value Net B. My Plan C. Strengths & Weakness D. Opportunities & Threat IV. Conclusion-----------------------------------------------------------------13 V. Reference-------------------------------------------------------------------15

Introduction
.Game theory From Wikipedia, the free encyclopedia
Game theory is a branch of applied mathematics that is used in the social sciences (most notably economics), biology, engineering, political science, computer science (mainly for artificial intelligence), and philosophy. Game theory attempts to mathematically capture behavior in strategic situations, in which an individual's success in making choices depends on the choices of others. While initially developed to analyze competitions in which one individual does better at another's expense (zero sum games), it has been expanded to treat a wide class of interactions, which are classified according to several criteria. Today, game theory is a sort of umbrella or unified field theory for the rational side of social science, where social is interpreted broadly, to include human as well as non-human players (computers, animals, plants) (Aumann 1987).

.Company Background
Stew Leonards Dairy Store z Is located at 100 Westport Avenue Norwalk, Connecticut 06851. z Was established in 1969. z beginning as a small dairy store. z Has 2,000 employees. z Has annual sales of $100 million. Stew Leonard has been very successful in the competitive U.S. supermarket business. In addition to high profits, he has won high praise, including the Presidential Award for Entrepreneurial Achievement and an Honorary Doctorate of Business from the University of Bridgeport (Connecticut). He approaches the often dull but necessary business of buying and selling groceries with creativity and fun.

Case Study:
STEW LEONARDS DAIRY STORE-Satisfying the Supermarket Customer
1. BEGINNING THE BUSINESS

In Connecticut, a northeastern state near New York, Stew Leonards father was the owner of a small dairy. He used to take Stew along when he delivered milk to families in the morning. From childhood, Stew Leonard remembers wanting to be somebody, wanting to be noticed and appreciated. Perhaps it had something to do with being the sixth out of seven children. After studying dairy manufacturing at the University of Connecticut, Stew Leonard assumed he would go into a partnership with his father. But his father died suddenly, and Stew found himself taking over the family business with his brother.

Fifteen years later, unexpected circumstances caused another change: The state put a highway right through the land where the dairy was located. Stew surveyed customers to see what they wanted, and he visited other small dairies to find out how they were doing. The farmer who was bottling and selling his milk on the premises, rather than selling it to a middleman was doing well, while many of the old-fashioned dairies were going under. Stew Leonard decide to redesign his dairy business to suit the changing times and his personality. More than door-to-door service, Stew Leonard found out that customers wanted good milk prices. So, he ended deliveries and instead created a factory-outlet dairy store. He bought raw milk from farmers in huge quantities, processed it in a glass-ended plant in the middle of the store and sold it in standard half-gallon (1.8 liter) cartons with his name

and a picture of a cow on them. His slogan was, Youd have to own a cow to get fresher milk.

As the business grew, he crated more and more of a Disneyland Dairy Store where customers might come and bring their children to be entertained. As Leonard remarks, Where children go, their mothers will follow. Not long after, he began adding to his original list of eight products and enlarging the building until it became, as proclaimed on the building, the worlds largest dairy store.

2.BUSINESS PRINCIPLE: SUPERMARKET SHOPPING SHOULD BE FUN To Stew Leonard, the distinction between a supermarket and an amusement park is slight, and not necessarily useful. Everyone feels supermarket shopping is drudgery, Mr. Leonard said in an interview in his office overlooking the selling floor. I try to make it fun.

Mr. Leonard clearly has the most fun greeting customers, and most are delighted to see him. As he made his way through the produce section during the interview, Dr. Shelley Dreisman of Westport, Connecticut, happily shook his hand, but her daughter, Emily, age six, shyly turned away. She only wants to shake hands with the cow, Dr. Dreisman explained.

That cow, it turns out, is often Mr. Leonard, too. When the burdens of running a $100 million business seem too great, he puts on a cow suit he keeps in his office closet and goes out and hugs customers.

Outside the store, in the parking lot, there is a petting zoo, a collection of live barnyard animals including geese, calves, baby goats, and sheep. Even the petting zoo serves several purposes. Mr. Leonard talks of it as an afterthought. When he sought to buy the property twenty years age, the elderly woman who owned it insisted on keeping her far animals on it.

Now, farmers lend him baby animals, which he periodically exchanges for younger models. The farmers like the arrangement, he said, because the animals come back well fed. Mr. Leonard pays for part of their diet, but the animals also get food from shoppers, who buy it in the store.

3.BUSINESS PRINCIPLE: LISTEN TO THE CUSTOMER

Stew Leonard elicits opinions from his supermarket customers through monthly customer interviews, called focus groups, and a suggestion box. Every day over 100 suggestions are received, typed up, and distributed to the appropriate departments. He tries out many of these suggestions, even if they seem unlikely.

According to Mr. Leonard, two recent successes came from customer ideas put into the suggestion box.One was to tell strawberries loose, like tomatoes, in the big flat trays from the farm, not in plastic one-pint (0.551 liter) baskets.

The produce manager said that if the strawberries were set out loose, people would eat them and the leftovers would never sell. He

turned out be right, but customers who can choose strawberries individually will drop them into plastic bags without watching the total, Mr. Leonard discovered, and some will buy twelve dollars worth. Sales tripled.

Then there were the turkey dinners, Mr. Leonard was selling them with vegetable and stuffing fresh but refrigerated, at $5.95 each, and roasting just three turkeys a day in the stores kitchens to keep up with demand. A customers suggested selling them at the hot-food bar, a growing part of the business, so he did, and demand jumped to twenty-one turkeys a day.

But some customers said they did not like paying $2.99 a pound for the gravy mixed in, or that the gravy had too many calories. Others said there was not enough gravy. So he started putting the gravy on the side, and demand rose to more than fifty turkeys a day.

Comment on the quality of Stew Leonards Business Strategy

Stew Leonard has managed to make extraordinary profits in the highly competitive U.S. supermarket industry by redesigning the business in significant ways. Executives of the company summarize their approach to business in the name of its founder: S-T-E-W. S stands for Satisfy the Customer, T for Teamwork, E for Excellence and Quality, and W for Wow!

S is for Satisfy the Customer, Stew Leonards approach to customer service is distinctive. One customer, after complaining that the steak was tough, was given not only a new steak but a bouquet of roses. As the rock of commitment at the store entrance says, The customer is always right.

T is for teamwork. The first team is the family. The Leonard family has over twenty of its members working for the company, and over half of the employees have a relative working for the company. Teamwork goes beyond family, though, to become a way of working with the customer and with other employees. In fact, nobody talks about employees at Stew Leonards; everyone is a team member.

E is for Excellence and Quality. Instead of the typical 12,000-item supermarket, Stew Leonards Dairy Store inventory includes only about 700 top-selling items. With a state-of the-art computer system, executives can track individual items and then make adjustments in order to increase sales. Besides reducing the number of products he sells, Stew Leonard has brought a factory-outlet model to the supermarket. Produce is purchased directly form the growers. Such items as milk and bread are produced and packaged right on the premises. Both of these practices eliminate costly handling by middlemen and distributors. The store makes

money because it sells a high volume of each high-quality product at a competitive price.

W is for Wow! Stew Leonard is the first to tell you that he has learned a lot about business from Disneyland. The founder of the store is a showman at heart whose motto is Show and Sell. From the beginning, he wanted to blend entertainment with shopping and eliminate the drudgery. There is Wow! In the huge displays, the entertainment, and in the crowds of happy customers. Despite its success, few supermarkets have imitated the S-T-E-W model so far. The factory-outlet specializing in one type of merchandise is transforming other industries, however. Toys R Us, for example, has overtaken a big share of the toy market with this approach. If you ask Stew Leonard why so few supermarkets imitate his, he will say that running this kind of business takes a lot of hard work.

Application of Case Study with Co-opetition

Value Net
Customers: housewives, schools, corporations and parents.

Competitors: Traditional supermarkets, Wal-mart, Grocery stores

Stew Leonard

Complementary: Other milk producers, Cows, Machines, Food

Suppliers: dairy farmers, meats, fish, produce, bakery, cheese and wine business. In the Value Net, we can regard the competitors as a customer, a supplier, a competitor and a complementary. Obviously, each of them has strong relationship which relays on each others. Stew Leonard

offers the product and the service to customers, and then a supplier offer the material to Stew Leonard. In the flow of cash, on the contrary, the chain is from the customer to the company, and then from the company to the customer. After deliberating ourselves position in the game, we

could analyze ourselves by the value net.

1. Stew Leonards customers. From this part, we have to think about who is our master customer? The answer is the customer, for example, housewives, schools, corporations and parents. Especially, the other group of customer is

the children, when they want to buy something or feed the animal in somewhere, they will buy forages.

2. Stew Leonards suppliers. The chief supplier is the dairy farmers, because the factory that produces the remark of the jar also is the part in this conceptual market. 3. Stew Leonards competitor. Those factories that produce the milk are regarded as competitors, and also including of the government in account of infrastructure may make your factory be enforced to move or the products quality doesnt achieve the criterion of the bureau of public health so that you need to review and improve it. From the Tactical part, we develop the better taste and guarantee the freshness that builds the customers loyalty to our company. From the supplys part, we need to have a good relationship with animal husbandries. From the sales part,

how to achieve the maxima benefit by efficient promotion and advertisement strategies is vital, too. 4. Stew Leonards complementary. Although from other companies to the milk producer is the type of competition, and reverse the traditional way, the value net makes each others become complementary. Let me take some examples, the

agriculture activities of government allow you access easily or help the farm become the scenic spot. Moreover, the government broadens roads brings convince to customers. On the other hand, the government could play the rules of the customerthe supplierthe competitor at the same time like the customer and the supplier plays the symmetrical parts, and the complementary and the competitor plays the role of pirate. The

company exists the win-win situation as well as the lose-lose situation in the relationship of the customer the supplier the complementary and the competitor so that co-petition strategy is worthy of deliberating.

My Plan
Mission 1. Our mission to create happy customers. 2. The customer who complains is our friend. 3. Its five times harder to find a new customer than it is to keep an old one.

Rule Rule #1-The Customer is Always Right. Rule #2-If the Customer is Ever Wrong, re-read Rule #1.

1. 2. 3. 4. 5.

Strengths and Weakness Always keep the food fresh. Good customer-service. Low cost the culture of organization Reputation.

Opportunities and Threats 1. The same competitive business. 2. Complementary Ex: Traditional Market, Convenient storesetc. 3. Supply of forward intergration.

Strategic Choice Business strategies: z Cost leadership z Differention Corporate strategies: z Vertical Integration z Strategic Alliance z Diversification

z z z z z

Strategies implement Using RFID, ERP, EDI can help the business operate efficiently. Supermarkets parking lot, there is a petting zoo. Let people feel shopping is a fun thing. Build own brand. Contribute to the society. Create win-win situation.

Strengths & Weakness

1. Always keep the food fresh. For the dairy product, how to keep the food fresh is primarily. Like the company get the milk from the farm, sending it to the market immediately. Stew Leonard's claims "Hello, from over 3,000 cows in Ellington, CT!" (their own farm) on its milk cartons. 2. Good customer-service. Stew Leonard establish an suggestion box to receive any customer s opinions or complaints about the company, moreover, they emphasize the one of strategies of the customer is always right, If the

customer is ever wrong, re-read rule 3. Low cost According to the information, Stew Leonard's is not only the world's largest dairy store; it is also in the Guinness Book of World Records for having "the greatest sales per unit area of any single food store in the United States." Stew based on the economies of scale to achieve the

volume of production and minimizing the cost, like using the specialized machines, the process manufacturing, and specialization. Besides, they can get the low-cost access to productive inputs because they have own dairy farm. 4. the culture of organization the managers treat their employees as their friends or family like managers memorize the name of every employees or have a lunch with operational employees that could reduce the barrier of communication and enable the top manager receive the employees perception about Stew which could boost the employees s loyalty and commitment.

5. Reputation. A firms reputation is a socially complex relationship between the customers and a firm. After the Stew developed it, its reputation can

last a long time, even of the basis for that reputation no longer exists.

Opportunities & Threat

1. The same competitive business. Please refer to value net pictures and contents. 2. Complementary. Please refer to value net pictures and contents.

3. Supply of forward intergration.

He bought raw milk from farmers in huge quantities, processed it in a glass-enclosed plant in the middle of the store and sold it in standard half-gallon (1.8 liter) cartons with his name and a picture of a cow on them. milk. His slogan was, Youd have to own a cow to get the freshest He built his own brand.

Conclusion
Deciding the decision has to consider many interactive factors and the situations which are related. It is definitely effective to use the

Game Theory to deal with the complicated problems. Mr. Leonard made an agreement with farmers. Farmers lend him baby animals which he periodically exchanges for younger models. The farmers like the arrangement because the animals come back to get a well fed. Mr. Leonard also pays for part of their diet, but the animals also get food from shoppers, who buy it in the store. We certainly found out that this is

right the win-win situation between the suppliers, the customers, and the firm. Later, Mr. Leonard expanded the business lager and larger and also found the unique supermarket. Just like <As You Like It>written by William Shakespeare, All the worlds a stage, And all the men and women merely players; They have their exits and their entrances; And one man in his time plays many parts. To change the game theory, you need to change one or more factors that is to say to change the Player (P), the Added value (A), the Rule(R), the Tactic (T), and the Scope(S). PARTS not only have the function of urging you to break the ponder pattern, but also provide you to find out the method. Once you participate in the game, youll change it. You dont make any decisions at the event, and the game will be new one because of joining in it. The way of changing game is joining in it, but the

intelligent way is to get the returns and then join in the game again. The operated way of Stew Leonard changed is changing players and creating own added value. It can increase own added value through limited supplies when monopoly. The advantage of limited supplies is that you can get more benefits and it might bring about symbolic effects

and it might offer free promotion, and it might guide customers to buy the products which sold slowly in the standby period. In original Stew Leonards company ran the milk business, but now it adds other businesses-supermarket as well as the Petting zoo which be loved by children. As we can see it, the diversity business let us create more values in this market. Every dairy is a player originally, but Stew Leonard changed the game. He decreased players, using the tactic to enhance his position of the market. The tactic is taking some action to produce other players realization. Persons realization leads his behavior, so every thing is involved in realization. Changing the persons realization, the Game will be changed, too. In the case, Stew Leonard listened for customer and then changed their shopping behavior, for example, customers bought fruits which were packed a bag before. After Stew Leonard facilitated

the traditional ways, customers could choose fruits individually will drop them into plastic bags without watching the total. Therefore customers consumed more money. It is Mr. Leonards tactic which are satisfying the customer and getting the benefit from them. Switching over to operate, changing rules and tactic might bring out good effect, and the game will be better. When you want the game to be better, dont get into a rut, but to change it.

Reference
1. / / 2. Making Business Decisions :FRANCES BOYD (American Language Program, Columbia University) :Longman 3. Free encyclopedia in Yahoo Internet 4. www.wretch.cc/blog/dreamslover&article_id=2429174 5. mail2.scu.edu.tw/~cpfan/gm_index.htm 6. www.publish.com.tw/new/hotissue/20060227.htm 7. http://www3.nccu.edu.tw/~jthuang