The Business Strategy Game

• Everyone started with same set of parameters. What would the other teams do?

• We read the book to see what values or strategies counted most. All depends on competition

• Prepare our company for future competition. Keep an eye on competition

Initial Key Strategy goals • Move towards building an international market

– Plant decisions - build slowly, one step at a time

• Increase productivity and profitability in Ohio by running factory at capacity • Open in Asia first, then move into Europe• This saved import fees and reduced manufacturing cost • Most profitable due to low wages•  • How to finance growth in USA, Asia and Europe• Issue stock (decreases per share value but is equity not debt) • o       Issue a long-term loan for remainder• o       Keep bond rating up by limiting debt ratio•           Set a reasonably low price to ensure that we will not be priced out of the market and can sell our share • o       Did not try to be a volume dealer•           Tried to make quality, low priced shoes relative to market•           Increase model availability and quality by a factor of 50• o       Initial goal was 100 then see what everyone else did• o       It looked like most teams made this adjustment too•           Increase service rating and see what happens•           Maintain visibility in private-label market• o       Low profitability market. Increased price to break-even•           Sold most of production in branded markets for higher profits•           Get some celebrity endorsement• o       Focused on candidates with 50 or over• o       Bid 1000 on first one - then more reasonable expenses•  • Read and analyze all reports looking for opportunities and strategy changes.•

Initial evaluation year 11• Evaluated competitor’s strategy to counter threats•  • B- massive worldwide construction and productive capacity in all areas• Appeared to want to be largest producer• Set lower price than us is Asia•  • Stock-outs concerned us but we did not to raise our price too quick or too much.• Increased prices slowly so would not drive the customers away.•  • Plant capacity• Build in Asia 1,000•  • Came in sixth!!! Do not panic! Set up strategy for long run.•  •  •  

Evaluation year 12

• Evaluated competitor’s strategy to counter threats•  • D- strong competition in Europe next year• Several teams setup factories in Asia but forgot to pay workers.•  • Plant capacity• Build in Europe 1,000•  • We had very low service ratings – stock outs again• Raised prices again all areas•  •  • Moved up to third

Evaluation year 13

• Evaluated competitor’s strategy to counter threats• A-    Building in Europe • a.       Have 2,000 in Asia. Selling @ 37.50 • b.      Carried large inventory (835) in private label Selling @ 27.00 •  • Massive building in Europe for yr 14 –10,000 capacity, demand 8,077• Asia has 11,000 capacity, demand only 5,177•  • Add automation to Ohio to increase efficiency and lower cost• Increased capacity in Texas (1,000) and Europe (1,000) • We will have 7,000 worldwide •  • Strategy finally showing

Evaluation year 14• Evaluated competitor’s strategy to counter threats

– A – moving down but still has 7,000 capacity• Still carrying large inventory in private-label Selling @ 29.00

• Prices too high in NA $50.00

– H – building in Asia now (1,000) has 9,000 capacity

– B – quality below 50 in private

– Massive inventory (11,209) and (5000) from other teams can be let loose soon

– Lots of excess capacity worldwide – hold on new construction

– Raised price in NA to avoid stock out 

Evaluation year 15• Evaluated competitor’s strategy to counter threats• A – moving up

– Currnetly has 8,000 capacity– Still carrying large inventory in private-label Selling @ 30.00– Prices too high in NA $50.00– Low sales in Asia but may be moving up

• H – has 9,000 capacity– Prices higher in NA and Europe but competitive Watch for move– Did not set wages in Asia

• B – quality below 50 in private– Massive inventory (11,434) can be let loose soon

• Add automation to Texas plant and expanded 1,000 

Summary:

• Slow growth and minor corrections everywhere rather than jumping in full steam

• Started at sixth place year 11, then moved to third place year12, and then kept first place remainder

• NOTE: If you would have bought 100 shares of our company in year 10 at $15.00 per share, today they would be worth $17,425!!!

Stock Value

$0.00

$50.00

$100.00

$150.00

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Stock Value

NOTE: If you would have bought 100 shares of our company in year 10 at $15.00 per share, today they would be worth $17,425!!!

Sales Revenue Growth

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500000

1000000

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Sales Revenue

Earnings per Share

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$5.00

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Earnings perShare