The Business Strategy Game

Online 8th Edition

Orientation and Overview

1-1 McGraw-Hill/Irwin

© 2005 The McGraw-Hill Companies, Inc. All rights reserved.

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 worldwide²production and sales activities can be pursued in North America, Latin America, Europe-Africa, and Asia Pacific  There are 12 market segments²4 geographic segments each for branded footwear sales to retailers, for online footwear sales direct to consumers, and for private-label sales
1-2 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc. All rights reserved.

thus allowing you and your comanagers to proceed rationally and logically in deciding what to do. 1-3 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. Inc.  Cause-effect relationships and revenue-cost-profit relationships are based on sound business and economic principles. All rights reserved.  Company operations are patterned after those of an athletic footwear company that makes its footwear at company-operated plants.  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.What Is The Business Strategy Game All About?  The industry setting is modeled to closely approximate the realworld character of the globally competitive athletic footwear industry. .

 Your challenge is to craft and execute a strategy for your athletic footwear company that. Inc. As a senior executive. delivers good bottom-line results and builds shareholder value. you get to test your ideas about how to run a company (in as realistic a competitive market setting as can be created). .What Is The Business Strategy Game All About?  You and your co-managers have responsibility for managing all aspects of the company¶s operations. and the ³live case´ nature of the simulation provides prompt feedback on the outcomes of your decisions. when pitted against the strategies of rival companies. 1-4 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. All rights reserved.

XP. or 2003 versions).How Does The Business Strategy Game Work?  Virtually all BSG activities take place online. your work is saved and transferred back to the server. when you exit a session. all that is required is an Internet connection.  You can either use the same PC for all BSG sessions or you can use different PCs. Internet Explorer.  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).  The last decisions saved to the BSG server at the time of the decision deadline are the ones used to generate the results. . and Microsoft Excel. All rights reserved. 1-5 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. on a PC that must be installed with both Internet Explorer and Microsoft Excel (either the 2000. Inc.

and a solid B+ credit rating. footwear quality.  Each decision period in The Business Strategy Game represents a year. costs. net profits of $25 million (equal to $2. and so on.How Does The Business Strategy Game Work?  All companies start out on the same footing²with equal sales volume.  The company you will be running began operations 10 years ago. .  The company had Year 10 revenues of $238 million. had an ROE of ~17%. global market share. profits. Inc. revenues. 1-6 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. All rights reserved.50 per share). and the first set of decisions you and your comanagers will make is for Year 11.

All rights reserved. Inc. .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 1-7 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies.

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 focus on one or two geographic regions or strive for geographic balance.You Have Many Strategic Options  Company managers have wide strategic latitude in staking out a market position and striving for good performance. Latin America. 1-8 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. 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. and North America markets. Inc. Companies can pursue essentially the same strategy worldwide or craft slightly or very different strategies for the Europe-Africa. . There¶s no built-in bias that favors any one strategy. Asia-Pacific. All rights reserved.

 In other words.No One Strategy Is ³Best´  Most any well-conceived. Inc. All rights reserved. 1-9 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. well-executed competitive approach is capable of succeeding. which strategies deliver the best performance hinges on the strength and interplay of the strategies employed by rival companies²not on some mystery ³silver bullet´ decision combination that players are challenged to discover. . provided it is not overpowered by the strategies of competitors or defeated by the presence of too many copycat strategies that dilute its effectiveness.

Inc.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) © 2005 The McGraw-Hill Companies. All rights reserved. 1-10 McGraw-Hill/Irwin .

S/Q ratings. every company¶s strategic challenge is to craft a competitive strategy (consisting of its prices.A Company¶s Competitive Effort visvis-à-vis Rivals Is Crucial  All the sales and market share differences among companies are attributable to differing competitive efforts on price.  Hence. region by region. retailer support. models offered. delivery times. 1-11 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. advertising. Inc. and so on) that it believes will produce the desired sales and market share outcomes when pitted against the competitive strategies of rival companies. advertising. All rights reserved. S/Q rating. . and so forth. models. delivery times. retailer support.

All rights reserved.A Battle of Strategies  Following each year¶s decisions. you will need to scout the strategies of rivals.  Armed with this information. and come up with a competitive strategy of your own aimed at ³defeating´ their strategies and boosting your company¶s performance. 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¶ll be provided with Competitive Intelligence reports containing information of the actions rivals took to capture the sales and market shares they got. . Inc. 1-12 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. try to judge what they will do next.

 Just as you are trying to win business away from rival companies. . and make sure your footwear is attractively priced and competitively marketed. 1-13 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies.Outcompeting Rivals Is the Key to Market Success  You¶ll have to stay on top of changing market and competitive conditions. Inc. try to avoid being outmaneuvered and put into a competitive bind by the actions and maneuvers of 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. All rights reserved. some or all rivals are certain to be actively striving to take sales away from your company.

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. 1-14 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. All rights reserved.  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. Inc. .

2. . 1-15 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. 4. 3. Maintain a return on equity investment (ROE) of 15% or more annually. Grow earnings per share at least 7% annually through Year 15 and at least 5% annually thereafter. Achieve an ³image 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). 5. Maintain a B+ or higher credit rating.How Company Performance Is Judged Board members and shareholders/investors have set five performance objectives for the company: 1. Achieve stock price gains averaging about 7% annually through Year 15 and about 5% annually thereafter. All rights reserved. Inc.

All rights reserved.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 ROE Credit Rating Stock Price Image Rating 20% 20% 20% 20% 20% 1-16 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. Inc. .

The Two Scoring Standards Two scoring standards are used in calculating ³performance 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. Inc. All rights reserved. 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 ³?/Help´ screens for pages 1. ROE. and 3 of the Footwear Industry Report. 2. 1-17 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies.

All rights reserved. 1-18 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. Inc. .The Two Quizzes There are 2 ³open book´ 20 multiple-choice question quizzes built into the exercise. Time Limit = 45 minutes. Time Limit = 75 minutes. Click on the links for the quizzes on your ³Corporate Lobby´ web page for more information²the three sample questions for each quiz give you an idea of what to expect. The quizzes are taken online and scored immediately upon completion: Quiz 1: Covers the Player¶s Guide²its purpose is to spur you to read and absorb how things work in preparation for managing your company. Quiz 2: Covers the Company Reports and certain information in the Footwear Industry Report²this quiz serves as a check to see if you understand the numbers and how they are calculated.

The Peer Evaluations  At the end of the exercise. All rights reserved. Inc. .  The peer evaluations are for your instructor only and are completely confidential. 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. 1-19 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies.

"think strategically" about your company's competitive market position. You¶ll have to wrestle with a full array of industry statistics. and figure out the kinds of actions it will take to outcompete rivals. You and your co-managers will have to chart a long-term direction for your company. craft a strategy. company operating reports and financial statements. and an assortment of benchmarking data and competitive intelligence on what rivals are doing. set and achieve strategic and financial objectives. All rights reserved. and adapt it to changing industry and competitive conditions.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 marketplace²there is a very tight connection between the text for the course and The Business Strategy Game. Learning to do all these things and gaining an appreciation of why they matter are the heart and soul of courses in business strategy. You¶ll have to match strategic wits with the managers of rival companies. 1-20 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. . Inc.

Inc. 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. . responsible business decisions. and being accountable for delivering good results. You¶ll see why you cannot hope to understand a company¶s business and make prudent decisions without full command of the numbers²you won¶t have to play BSG-Online very long to appreciate why shooting from the hip is a sure ticket for managerial disaster. making sound.  Provide you with practice in sizing up a company¶s situation.What You Can Expect to Learn In addition.  Deepen your understanding of revenue-cost-profit relationships and build your confidence in utilizing the information contained in company financial statements and operating reports. All rights reserved. 1-21 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies.

Inc.  Step 2: Go to www. 1-22 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies.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).com  Step 3: Click on the ³Student Registration´ button and enter your company registration code in the box.bsg-online.  Step 4: Click that you are registering with a credit card. All rights reserved. .

password. 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. 1-23 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. Inc. Once you are registered. If you have no credit card.How Do You Register?  Step 5: Complete the personal registration information (user name. . and so on) and the credit card payment process (if not using a prepaid access code that came with your textbook). All rights reserved. you have full use of the student portion of the BSG Online Web site. 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.

All rights reserved. and log-on activities of co-managers. Inc.  You have anywhere.bsg-online. 1-24 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. so long as the PC is equipped with Internet Explorer and Microsoft Excel. you are automatically routed to your company¶s ³Corporate Lobby´ web page. messages. . current interest rates. anytime access to your Corporate Lobby page from any PC that is connected to the Internet.com.  The Corporate Lobby page is your gateway to all BSG-Online activities. the availability of used plant capacity that can be purchased for immediate use. 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. upcoming deadlines.The Corporate Lobby Page  Each time you log-on to www.

Creating a Name for Your Company  Shortly after registering. and other company stakeholders.  Your company¶s name must begin with the letter of the alphabet that you have been assigned. shareholders. thus you should select a name that you are proud of and that reflects the image you want to project to your customers. To name the company. you and your co-managers should decide on a name for your athletic footwear company. .  All company names are ³public´ and appear in the Footwear Industry Report. and enter your company¶s full name in the space provided. Names can be up to 20 characters. All rights reserved. Inc. click on the link at the top of the Corporate Lobby. 1-25 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies.

Some Procedures  See the Decision Schedule link on your Corporate Lobby Web page for the dates and deadlines for the decisions. since the results are processed automatically on the BSG-Online servers immediately following the deadline. see what happened. At that point you can log-on.  You will be notified via e-mail as soon as the results are ready. 1-26 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. All rights reserved. Inc. .  The results of each decision will be available online in less than 1-hour following the decision deadline. The decision deadlines are strictly enforced. and proceed with the next decision.

 If another logged-on co-manager clicks on the Save icon and uploads new decisions to the server. Remember: the last set of decisions saved to the server are used to process the results. . Instant messaging can be used to communicate back-and-forth.  Info on your Corporate Lobby screen indicates the last date at which a co-manager saved decisions to the server and whether other comanagers are currently logged on.An Important Capability  All company co-managers can access the latest decisions and results from any PC connected to the Internet²there¶s no need to e-mail decisions back-and-forth to get things coordinated. Inc. 1-27 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. All rights reserved.  All company co-managers can be logged on simultaneously on PCs at different locations (or side-by-side in a lab). you will be notified the next time you press the Save icon²you then have the choice of (1) overriding the comanager¶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.

All rights reserved. the Footwear Industry Report.  Make full use of the ³?/Help´ sections for the Company Reports. . and how to use the information to good advantage. 1-28 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. Inc. and the Competitive Intelligence Reports²these screens provide essential details of what the numbers mean.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 ³?/Help´ sections for each decision screen²these provide full explanations of the factors surrounding each and every decision entry and provide all kinds of tips and suggestions to guide your thinking. how they are calculated.

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. 1-29 McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies. and being held fully accountable for the results of your actions²just as managers in the real-world are held accountable for the performance of the companies they run. Students who resort to trying to ³game the system´ almost always shoot themselves in the foot. The overriding purpose of The Business Strategy Game is to give you practice in making business decisions. All rights reserved.  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).Tips for Success  Run the company in a serious. professional manner. Inc. . learning to craft winning strategies in a competitive market.

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