Once you have finished manipulating the above numbers, go back to the Sales Forecast tab.
You will see much of the work you have already done is reflected on this page now. Set your internet shoe price here, slightly above the retail price. The manual tells you that retailers will fall away if you sell shoes on the internet for less than 40% above the retail price. That's true, but the number of retailers should be your last consideration (unless you've ignored them for so long that the shrinkage has become constricting). The number of shoes in demand will be handled by the remaining retailers provided you keep it reasonable. If it seems that your retailers are falling away alarmingly, up your internet prices somewhat. On the Sales Forecast page, you can fine tune such things as advertising. Some hard numbers may be useful here, since students seem to generally approach these areas with no idea of what they should be. Your advertising budget in the various regions should be set initially at something like $9000 for NA and EA, and 5000 for AP and LA. These will climb to 15-20,000 for NA /EA and 7500-10,000 for AP/LA. See what is needed to give the shortfalls in Branded shoe supply that you want. Rebates should be set to 0, delivery time to 3. Retail support should not exceed 250-350 and the number of retailers should not exceed 2500 for NA/EA (and 1500 is acceptable). For LA/AP it can be 1500 and 1200 is acceptable. The additional money spent on retailer support, multiplied by the additional number of retailers, can be expensive. If you lower S/Q, selling off inventory makes no sense. If your current targeted S/Q for NA is a 7, and you have large numbers of shoes in the region left from last decision which are an 8, then you can manufacture shoes in NA at a 6 to reach your target of 7, since the S/Q is an average. It almost never pays to sell off inventory in a region from a preceding decision of that inventory is a higher S/Q than the current planned target.
In settling on the numbers for this page, you should try two versions:
1) The version where the "industry average" is set by the BSG.
2) The version where the "industry average" is set at the decisions of your strongest opponent, with the assumption that your opponent will only try to become stronger (lower prices, higher ad support, etc.). This will give you the worst case scenario.
A NOTE ON IMAGE:
Image is probably the area you should worry least about. It should follow market share anyway. But, perhaps as a result of this page and the winning strategies which have ensued, McGraw Hill has introduced an option called "corporate citizenship". The page is designed to boost image ratings for your team, ostensibly, but actually is designed to boost the image of global corporations. The options on the page rarely affect EPS/ROE positively except for the energy initiatives, and that only irregularly. This page, incidentally, is not Fantasyland, since the section is only designed to boost image, not to contribute in any meaningful way to a responsible role for your corporation. That's actually the function of "green-ness" in the corporate world. It is a marketing tool and looking beneath the covers of any corporate "green initiative" will invariably reveal a grimier reality. For example, the mandates of the EPA or the EU are often portrayed as a corporate "green initiative" in company advertising. In reality, they are mandated by law, and in most cases were fought bitterly by the very same corporations now boasting of them.
ROUND BY ROUND - OUR EXPERIENCE
Note: the number of rounds in the game is set individually by each professor. I have seen very long games in classes where professors spent a year on the course. But I have also seen professors who had their students start the game anew several times, each with only 4 rounds, played repeatedly throughout the course. Following are the actual results for our team. Remember, this was a FIRST, inept attempt at putting the above principles into play. Since, we have collaborated with hundreds of teams and have refined the strategy as outlined above.
ROUND 1: DO NOT WIN SMASHINGLY
If you choose to lose this round so you can buy up your stock 2nd round (there are limits on the amount of stock you can buy back in the game), prepare yourself. It is a shock for every team which sets out on such a course when it actually occurs. And professors tend to become alarmed as well. One team in South Africa received a summons for "counseling" from an instructor after Round 1, gravely informing them that they had done worse than a placebo team with no one in it, and that he was alarmed and concerned for their future well-being in life. Recovery from a grand loss can be slow, although a great deal of money can be saved in buying up the stock.
Round 1 results for our team (The prices in NA were reflective of prices in all regions. We were Team B)
Team Price of shoes in NA S/Q MN
A 50 7 249
B 34.70 7 52
C 50 6 200
D 48.50 6 249
E 49 6 200
F 50 7 249
G 52 7 217
*MN=Model Number
Although you do not want to go bankrupt in Round 1, you may want to lose it, so that your stock price falls (although, as traffic on this page has increased to some 200 new users daily, the game is getting tighter, and forfeiting the first round badly may put you at a distinct and fatal disadvantage for several rounds). If you select a minimum number of model numbers for your shoes, and keep your prices low enough, and you can almost be guaranteed of that result, depending upon the choices your opponents make. However, if the stock rises, you should still buy it up since equity will fall, leading to a higher ROE (Return/Equity) than if you did not.
Always spend time on the decisions and results of others. Especially early in the game, when slight differences in other teams' approaches will illustrate what is working best. The instructor can set many of the parameters in the game, and you will want to tailor your moves accordingly. You are permitted to see the same results for other teams that you see for your own, with a click here, a click there. It will determine the outcome of the game.
Look for slight variations in the decisions made by these other teams - even, and maybe especially those who do not win the round from week to week - and look at the outcome. At times, your opponents will not themselves be aware of these relationships among trailing teams, because they will be comparing themselves to the leaders. You can learn from them. For example, a team (Team D below) which declined to raise S/Q did respectably, though making errors elsewhere - their prices were higher, their model numbers lower. As a consequence, they placed 3rd. But their savings in expenses largely cancelled the mistakes. Because they did not fare as well as the leaders, they changed course the following round and upped their S/Q, with the result that they fell further behind. But even an inexperienced observer could spot the distinction between this team and a team whose decision were exactly alike, except for the S/Q (the other had raised S/Q). And the other team did poorly by comparison. The reason the other teams did not spot the differences and quit pursuing S/Q is because they were focused only on the moves of the team which led after the first round. That will not, if you follow our advice, be yours.
Above all, remember that this is a game over time, not a "sudden death" playoff. Keep your Sherlock Holmes hat on, throughout the game. Look at the Strategic Group Map for each region. If all the other companies are cutting one another's throats in the upper end of the market (and vanity being as it is, they will most likely, unless they're also reading this), head for the low end, but not all at once. Drift there so as not to make it evident what you're doing. If they're in the low end, head slightly higher but beat them in prices with your higher production capacity - Economy of Scale. Study your opponents carefully. Get a feel for their foibles as well as their successes.
The inverse is also true. There will be at least one other team looking at your results under the same microscope you are turning on them, and especially if you consistently are doing well, as you should be, later in the game. As a consequence, it is best that, when you make decisions shifting your position in the market, that you do so with at least 2 changes. If you do well in the round, even though you believe you know which of the 2 changes was crucial, your opponents may not. And there is a 50% chance that they will choose the wrong answer when trying to guess which was responsible for your success. Trust in the "sheep mentality" prevailing. The majority of those "in the room" will look for safety in the herd. They will try repeatedly to ape you. Your best advantage in the game are the elements of confusion and surprise. Remember this is a game, a strategy game, and like simpler strategy games, such as rock- paper- scissors, a good part of the game is in leading your opponents to believe you will be making moves in a direction exactly opposite of where you are truly headed.
If your stock price tanks after the first round, then if you are smart, you will make arrangements to buy nearly all of your stock back. We - in planning the following rounds - could borrow enough to buy back all the stock shares permitted (2,500,000 of 10,000,000 shares) in 2 rounds and the rest of the game we were dividing by 3 (the remaining 7,500,000 shares) while others were dividing by 4 (the original 10 million shares) in 4 in ROE/EPS calculations - giving them an automatic 33.3% disadvantage in scoring until 2 other teams "caught on" late in the game and did likewise. 3 of 7 teams actually sold shares, increasing the number by 20% and further disadvantaging them.
The first round, and the rest of the game, will be cat-and-mouse or, rather, lion and mouse since you now have an advantage in capacity
Once you have finished manipulating the above numbers, go back to the Sales Forecast tab.
You will see much of the work you have already done is reflected on this page now. Set your internet shoe price here, slightly above the retail price. The manual tells you that retailers will fall away if you sell shoes on the internet for less than 40% above the retail price. That's true, but the number of retailers should be your last consideration (unless you've ignored them for so long that the shrinkage has become constricting). The number of shoes in demand will be handled by the remaining retailers provided you keep it reasonable. If it seems that your retailers are falling away alarmingly, up your internet prices somewhat. On the Sales Forecast page, you can fine tune such things as advertising. Some hard numbers may be useful here, since students seem to generally approach these areas with no idea of what they should be. Your advertising budget in the various regions should be set initially at something like $9000 for NA and EA, and 5000 for AP and LA. These will climb to 15-20,000 for NA /EA and 7500-10,000 for AP/LA. See what is needed to give the shortfalls in Branded shoe supply that you want. Rebates should be set to 0, delivery time to 3. Retail support should not exceed 250-350 and the number of retailers should not exceed 2500 for NA/EA (and 1500 is acceptable). For LA/AP it can be 1500 and 1200 is acceptable. The additional money spent on retailer support, multiplied by the additional number of retailers, can be expensive. If you lower S/Q, selling off inventory makes no sense. If your current targeted S/Q for NA is a 7, and you have large numbers of shoes in the region left from last decision which are an 8, then you can manufacture shoes in NA at a 6 to reach your target of 7, since the S/Q is an average. It almost never pays to sell off inventory in a region from a preceding decision of that inventory is a higher S/Q than the current planned target.
In settling on the numbers for this page, you should try two versions:
1) The version where the "industry average" is set by the BSG.
2) The version where the "industry average" is set at the decisions of your strongest opponent, with the assumption that your opponent will only try to become stronger (lower prices, higher ad support, etc.). This will give you the worst case scenario.
A NOTE ON IMAGE:
Image is probably the area you should worry least about. It should follow market share anyway. But, perhaps as a result of this page and the winning strategies which have ensued, McGraw Hill has introduced an option called "corporate citizenship". The page is designed to boost image ratings for your team, ostensibly, but actually is designed to boost the image of global corporations. The options on the page rarely affect EPS/ROE positively except for the energy initiatives, and that only irregularly. This page, incidentally, is not Fantasyland, since the section is only designed to boost image, not to contribute in any meaningful way to a responsible role for your corporation. That's actually the function of "green-ness" in the corporate world. It is a marketing tool and looking beneath the covers of any corporate "green initiative" will invariably reveal a grimier reality. For example, the mandates of the EPA or the EU are often portrayed as a corporate "green initiative" in company advertising. In reality, they are mandated by law, and in most cases were fought bitterly by the very same corporations now boasting of them.
ROUND BY ROUND - OUR EXPERIENCE
Note: the number of rounds in the game is set individually by each professor. I have seen very long games in classes where professors spent a year on the course. But I have also seen professors who had their students start the game anew several times, each with only 4 rounds, played repeatedly throughout the course. Following are the actual results for our team. Remember, this was a FIRST, inept attempt at putting the above principles into play. Since, we have collaborated with hundreds of teams and have refined the strategy as outlined above.
ROUND 1: DO NOT WIN SMASHINGLY
If you choose to lose this round so you can buy up your stock 2nd round (there are limits on the amount of stock you can buy back in the game), prepare yourself. It is a shock for every team which sets out on such a course when it actually occurs. And professors tend to become alarmed as well. One team in South Africa received a summons for "counseling" from an instructor after Round 1, gravely informing them that they had done worse than a placebo team with no one in it, and that he was alarmed and concerned for their future well-being in life. Recovery from a grand loss can be slow, although a great deal of money can be saved in buying up the stock.
Round 1 results for our team (The prices in NA were reflective of prices in all regions. We were Team B)
Team Price of shoes in NA S/Q MN
A 50 7 249
B 34.70 7 52
C 50 6 200
D 48.50 6 249
E 49 6 200
F 50 7 249
G 52 7 217
*MN=Model Number
Although you do not want to go bankrupt in Round 1, you may want to lose it, so that your stock price falls (although, as traffic on this page has increased to some 200 new users daily, the game is getting tighter, and forfeiting the first round badly may put you at a distinct and fatal disadvantage for several rounds). If you select a minimum number of model numbers for your shoes, and keep your prices low enough, and you can almost be guaranteed of that result, depending upon the choices your opponents make. However, if the stock rises, you should still buy it up since equity will fall, leading to a higher ROE (Return/Equity) than if you did not.
Always spend time on the decisions and results of others. Especially early in the game, when slight differences in other teams' approaches will illustrate what is working best. The instructor can set many of the parameters in the game, and you will want to tailor your moves accordingly. You are permitted to see the same results for other teams that you see for your own, with a click here, a click there. It will determine the outcome of the game.
Look for slight variations in the decisions made by these other teams - even, and maybe especially those who do not win the round from week to week - and look at the outcome. At times, your opponents will not themselves be aware of these relationships among trailing teams, because they will be comparing themselves to the leaders. You can learn from them. For example, a team (Team D below) which declined to raise S/Q did respectably, though making errors elsewhere - their prices were higher, their model numbers lower. As a consequence, they placed 3rd. But their savings in expenses largely cancelled the mistakes. Because they did not fare as well as the leaders, they changed course the following round and upped their S/Q, with the result that they fell further behind. But even an inexperienced observer could spot the distinction between this team and a team whose decision were exactly alike, except for the S/Q (the other had raised S/Q). And the other team did poorly by comparison. The reason the other teams did not spot the differences and quit pursuing S/Q is because they were focused only on the moves of the team which led after the first round. That will not, if you follow our advice, be yours.
Above all, remember that this is a game over time, not a "sudden death" playoff. Keep your Sherlock Holmes hat on, throughout the game. Look at the Strategic Group Map for each region. If all the other companies are cutting one another's throats in the upper end of the market (and vanity being as it is, they will most likely, unless they're also reading this), head for the low end, but not all at once. Drift there so as not to make it evident what you're doing. If they're in the low end, head slightly higher but beat them in prices with your higher production capacity - Economy of Scale. Study your opponents carefully. Get a feel for their foibles as well as their successes.
The inverse is also true. There will be at least one other team looking at your results under the same microscope you are turning on them, and especially if you consistently are doing well, as you should be, later in the game. As a consequence, it is best that, when you make decisions shifting your position in the market, that you do so with at least 2 changes. If you do well in the round, even though you believe you know which of the 2 changes was crucial, your opponents may not. And there is a 50% chance that they will choose the wrong answer when trying to guess which was responsible for your success. Trust in the "sheep mentality" prevailing. The majority of those "in the room" will look for safety in the herd. They will try repeatedly to ape you. Your best advantage in the game are the elements of confusion and surprise. Remember this is a game, a strategy game, and like simpler strategy games, such as rock- paper- scissors, a good part of the game is in leading your opponents to believe you will be making moves in a direction exactly opposite of where you are truly headed.
If your stock price tanks after the first round, then if you are smart, you will make arrangements to buy nearly all of your stock back. We - in planning the following rounds - could borrow enough to buy back all the stock shares permitted (2,500,000 of 10,000,000 shares) in 2 rounds and the rest of the game we were dividing by 3 (the remaining 7,500,000 shares) while others were dividing by 4 (the original 10 million shares) in 4 in ROE/EPS calculations - giving them an automatic 33.3% disadvantage in scoring until 2 other teams "caught on" late in the game and did likewise. 3 of 7 teams actually sold shares, increasing the number by 20% and further disadvantaging them.
The first round, and the rest of the game, will be cat-and-mouse or, rather, lion and mouse since you now have an advantage in capacity
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