California State University, Northridge



Business Strategy Game (BSG) Charts

Rex Mitchell - 1/27/04

WHAT IS THE BSG?

* Computer simulation of competing companies

* Global athletic/casual shoe industry

* 3-4 person top management teams run each company

* Make annual decisions (c. 7 years)

* Learn of industry outcomes

* Teams measured on multiple business outcomes

LEARNING OBJECTIVES

1. Improve strategic thinking

2. Have hands-on experience with strategic business decisions:

* Diagnosing complex business situations

* Identifying key success factors

* Understanding revenue/cost/profit relationships

* Developing strategies to gain competitive advantages

* Dealing with competitors= moves & uncertainty

* Recovering from missteps

3. Gain insights into international competition

4. Integrate previous course concepts

5. More experience in team work

6. Have fun while learning!

SIX PERFORMANCE VARIABLES

* Sales revenue (5%)

* EPS (25%)

* ROI (20%)

* Market cap (25%)

* Bond rating (15%)

* Company strategy rating (10%) PM102

MANY ANNUAL DECISIONS

* Manufacturing decisions (up to 4 plants)

* Labor decisions (3 x 4 plants)

* Shipping decisions (4 x 5 destinations)

* Plant decisions (5 x 4 plants)

* Internet decisions (3)

* Private-label marketing decisions (3+)

* Branded marketing decisions (7 x 4 areas)

* Other possible decisions:

o Endorsement contracts

o Inventory liquidation

o Financing decisions (6 main areas)

PROCESS

* Organize teams

* Initial practice decision round(s)

* Then, series of (annual) decisions (roughly weekly)

o Review information, print reports, & make decisions

o Save decisions on copy of data disk

o Print decisions

o Make backup copies of disk & paper printout of decisions

o Give one of each to prof no later than time on class schedule

IT IS ABSOLUTELY ESSENTIAL that all company data disks are turned in on time!!

o Prof runs industry results & saves results on each company's data disk

o Process continues for the next (annual) decision cycle

TYPICAL PROCESS FOR MAKING DECISIONS IN BSG

1. Print/analyze/study reports from last annual cycle

2. Use Demand Forecast to get ideas re numbers of shoes you might sell

3. Make decisions on various decision screens

4. Synchronize in Demand Forecast screen

5. Look at bottom line projections (misleading before now)

6. Cycle back to 2 or 3 if not satisfied with projections

7. (When satisfied) Print two copies of decisions and exit

8. Make 1-2 copies of Company Data Disk (now has latest decisions)

9. Give disk plus printout of decisions to professor

10. Professor runs industry simulation and copies results on your data disk

11. Pick up data disk and go to step 1 for next annual cycle

GRADING

* Team grade on company=s performance on the 6 performance variables

- Plus favorable trends during latter years

- Plus special aspects of performance (e.g., good recovery)

* Company business plan

* Team=s final debriefing presentation and report

* Individual grade may be affected by team confidential evaluations at end

ELEVEN MAJOR COMPETITIVE FACTORS

(PM 25-32)

1. Wholesale selling prices **

2. Product quality (4 major components)

3. Product line breadth

4. Rebates

5. Current-year advertising

6. Brand image (including endorsements)

7. Numbers of retail outlets (4 geographic zones)

8. Retailer support & service (4 factors)

9. Company-owned stores

10. Web sales

11. Customer loyalty

SOME STRATEGIC ISSUES

* How to position company in world footwear market (e.g., global vs. multi-country strategy)

* Competitive strategy & what kinds of competitive advantage to try for

* Emphasis & balance among branded vs. private-label products (also Web)

* Emphasis & balance among 6 markets in 4 geographic areas

* Dealing with trade-offs in company-owned stores vs. traditional dealer network

* Positioning company on price, quality, service, breadth of product line, size of retailer networks, advertising,...

* Where to locate additional production capacity, how much, when, how

SOME ADDITIONAL ISSUES

* Dealing with environment changes (S&P 500, exchange rates, tariffs, industry trends & events)

* North America plant's high costs

* Possibility of cost savings in any portion of the value chain

* Having comparable offerings in all market segments?

* Overtime production vs. full employment and/or additional plant capacity

* What to do in year 11 to prepare for expected demand in year 12 (and same in following yrs)

WINNERS

* Develop a specific strategy & stick with it (many different strategies can work)

* Understand company operations

* Learn well how to run the game

* Analyze industry trends & their competition

* Maintain balance between demand and supply

* Are assertive & proactive

LOSERS

* Fail to develop & implement a specific strategy

* Typically change strategies several times as they try to copy successful competitor's strategies

* Don't understand company operations

* Don't understand how to run the game

* Don't analyze what is going on and consequently miss-guess competition

* Are always trying to "catch-up"

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