The Business Strategy Game

Online 8th Edition

Orientation and Overview

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 What Is The Business
Strategy Game All About?
 It’s 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 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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 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.
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 What Is The Business
Strategy Game All About?
 You and your co-managers have responsibility for
managing all aspects of the company’s 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.
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 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.
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 How Does The Business
Strategy Game Work?
 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), had an
ROE of ~17%, and a solid B+ credit rating.
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 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 (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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 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 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 the
Europe-Africa, Asia-Pacific, Latin America, and North
America markets.

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 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 companies—not
on some mystery “silver bullet” decision
combination that players are challenged to
discover.
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 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)
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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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 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 they 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 company’s
performance.
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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 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.

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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 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.
 It’s an exercise calculated to spur competition and to get
your competitive juices flowing.

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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 (the image
rating is tied to the styling/quality of a company’s branded
footwear and to its market share penetration).

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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?)
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.

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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.
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.
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 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.

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 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.
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 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.

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 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.

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 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.

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 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.
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 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.

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 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.

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 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.

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 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.

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 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.
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