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Learning Strategy
I listen, I forget. I see, I remember. I do, I understand.
Learning Strategy
Computer simulations are a form of combative
When we study one discipline at a time, we are like a bunch of blind people trying to understand what an elephant is.
Its a sheet of rawhide. Please tell me what it is? Its a steel tube.
Its a snake.
With business simulations, you can crawl all over and under the new venture to help you to see and understand the whole thing.
Accounting Marketing Distribution It is an enterprise!
Finance
Human Resources
Copyright 2006 Ernest R. Cadotte
Production
Learning Strategy:
Learn by Doing Participants learn about all aspects of strategic planning by managing a simulated new business venture.
The Marketplace scenario follows the lifecycle of a new product.
Business decisions are introduced as they become relevant in the evolution of the product and Copyright 2006 Ernest R. Cadotte company.
Business Team
Market
Opponent
Business Teams
Each team member assumes a tactical area of responsibility.
How conducted?
Business team receives information on current situation. Current situation is evaluated, strategy formulated and tactics set in placed. Tactical decisions are fed into the Marketplace simulator, along with decisions of opponents.
How conducted?
The business team can acquire information on what is happening in the marketplace: customer reaction to market decisions competitor actions Current situation is evaluated, strategy formulated, and tactics set in place.
Game Scenario
You and your business partners have decided to enter the international microcomputer industry. The microcomputer industry is in its introductory stage of the product life cycle.
You can setup an international Web Center for e-commerce, and/or four international sales offices.
Market Segments
(Market Structure)
Mercedes Traveler
Performance
Work Horse
Price
Copyright 2006 Ernest R. Cadotte
Chronology of Events
Q1: Organize the team, name the company, analyze market information, establish strategic
Chronology of Events
Q2: Test-market brands, prices, ad copy, media campaigns, sales staffing and internet tactics. Determine compensation package for employees and production schedule for each brand. Q3: Study end user feedback, competitive tactics, employee productivity, factory operations, and financial performance and make adjustments to strategy and tactics.
Copyright 2006 Ernest R. Cadotte
Chronology of Events
Q4: Perform a comprehensive strategic analysis and prepare a business plan. Present strategic analysis, business plan and financial request to venture capitalists. Q4 Q6: Initiate international roll-out
campaign.
Copyright 2006 Ernest R. Cadotte
Chronology of Events
Q7: Prepare report to the Board regarding
performance since presentation of Business Plan deviations from plan justification for departures strategic analysis of current situation plan for future
Bankruptcy
A firm is technically bankrupt if its cumulative losses exceed its equity investment. Bankruptcy occurs when the sum of the retained earnings and the common and preferred stock is a negative number. Stated differently, the management has used up all of the equity of the firm when the negative value of the retained earnings exceeds the value of the common stock.
Copyright 2006 Ernest R. Cadotte
Performance Evaluation
Balanced Scorecard- cumulative score for quarters 3 through 6 Business Plan Report to Board Strategic thinking and tactical execution Executive Briefings How well the company is prepared for the future
Asset management
Marketing effectiveness
Creation of wealth
Copyright 2006 Ernest R. Cadotte
The following slides provide an introduction to the Web Software for Strategy and Business Policy in the Marketplace
It Is Realistic!
You do what real-life strategists do: Evaluate market opportunities Write a business plan Raise money by selling your plan to investors Do what you said would work execute the plan Be judged not by your promises but by your results
Copyright 2006 Ernest R. Cadotte
It Is Organized!
The game scenario follows the logical process of starting up a new company. You are guided through the strategic planning and decision-making processes. Detailed help files are available at the touch of a button.
Introduction to Software
The step-by-step process that walks you through the information and decisions. The software controls your progression to reduce your uncertainty and to help you see the logic of the marketing process.
Copyright 2006 Ernest R. Cadotte
For illustration purposes, suppose you start up a company named Traveler Computers.
Copyright 2006 Ernest R. Cadotte
You can setup an international Web Center for e-commerce, and/or four international sales offices.
Market Segments
(Market Structure)
Mercedes Traveler
Performance
Work Horse
Price
Copyright 2006 Ernest R. Cadotte
You must decide which segment you want to target initially. As the exercise progresses, you are asked to select a second segment.
For example, the Traveler segment might be selected.
Copyright 2006 Ernest R. Cadotte
Once you select a segment, you must design a brand to meet the needs of the segment.
What features would make a computer more attractive to the Traveler segment?
You set the selling price, decide if you want to use a rebate, and signal to the sales staff which brand has the highest priority.
Copyright 2006 Ernest R. Cadotte
You select the benefits to mention in the ad and indicate their order of priority.
Copyright 2006 Ernest R. Cadotte
You can select marketing tactics that can increase the traffic to your site.
You can spend more or less than the industry norm to potentially change the relative attraction of your web site. What commission should you offer your partners?
Once at your web site, what can you do to increase the probability visitors will make a purchase?
The tactics are not equally good and some may not justify any expenditure.
You can specify how many should be assigned to each segment and service support.
And, how much should you invest in plant capacity for next quarter given your demand forecast and financial liquidity.
When your decisions are ready to be processed through the Marketplace simulator, a quality check is made to make sure there were no entry errors and nothing important was forgotten.
Immediately after processing, you find out how profitable the firm was in the quarter that just ended.
Copyright 2006 Ernest R. Cadotte
You can see your market share by segment and for the whole market.
You are given market research that tells you how satisfied your target segment is with your brand design and those of the competition. 100 is total satisfaction.
Copyright 2006 Ernest R. Cadotte
You are also given a profit analysis of each brand so that you can adjust your brand strategy.
If a brand is not doing well, you can study other brands and redesign your brand.
Each quarter, you will be presented with your balanced scorecard. Your goal is to be the best firm by Quarter 6 in Total Business Performance.
Copyright 2006 Ernest R. Cadotte
Once you select a segment, you must design a brand to meet the needs of the segment.
Using the computer on the road is important to the traveler segment. What features would provide this benefit? Using the computer on the road
How far do you go in giving the customers what they say they want?
Is more speed, software applications, memory, keys on the keyboard, etc. always valued? Could more of some feature even make a customer unhappy?
Copyright 2006 Ernest R. Cadotte
Suppose you could design the ideal candy bar. How many peanuts would you put in the candy bar to make you the happiest?
None A few? A bunch? A whole lot?
Yuk
None
few
bunch
whole lot
Number of Peanuts
Copyright 2006 Ernest R. Cadotte
Here are a number of response functions. Which one applies to peanuts, chocolate, coconut, etc?
Hot More is always better Hot
Cold
Cold
Less
More
Less
More
Response Functions
More adds value to a point & then takes away value A little is just right, more only takes away value Hot
Hot
Cold More
Cold
Less
Less
More
Response Functions
Hot Hot Little interest until threshold is crossed
Cold
Response Functions
Hot
Cold
Less
More
Just like the candy bar ingredients, you must discover the response function for each PC component.
Copyright 2006 Ernest R. Cadotte
Rugged casement
Microcircuitry
Wireless modem
6-hour battery
Compact keyboard
Problem
Strategic Analysis
Internal appraisal External appraisal
Strategy Formulation
Tactics
Definition of problem
Resources made Tactical Plans available Execution Strategic options Choice of one option
(Chosen Option = Strategic Thrusts)
Controls
Contract for market research on customers and competition Check pro forma financial statements
Copyright 2006 Ernest R. Cadotte
Costs (production, marketing, overhead) Profit goals What market will bear Competition
In the beginning, you will not be able to price above your costs
There are many startup costs which will exceed your revenues. Your production volumes will be very low, resulting in high per unit costs
No Early Profits
Costs to setup + & grow the business
Money 0 Time
Money
0 Time
Profit
decline
Demand
growth
introduction
Time
Demand drops slowly with small price increases and then drops dramatically with larger price increases
Your Price
Copyright 2006 Ernest R. Cadotte
Less Elastic
Elastic
Price premium for your brand
Your Ad
Low price
Easy to use
More productive
Fast
Office applications
Picture office workers
Most important
Least important
Cold
Cold
Less
More
Copyright 2006 Ernest R. Cadotte
Diminishing returns
Too little
Number of ads
Your Demand
Too many
Too few
Number of sales people
Your Demand
Shift the response function upwards with better brands, prices, advertising, sales force placement
Number of sales people
Low production
Low cash requirements Higher per unit production costs Risk of too little inventory
Stock outs Lost revenue Customer ill will (unhappy customers)
Copyright 2006 Ernest R. Cadotte
Projecting Demand
Sales people will probably sell between 30 and 100 units each. Demand is a function of market potential of the segment and market and the quality of marketing decisions. On average, sales people will sell 50 units each for the entire quarter.
Copyright 2006 Ernest R. Cadotte
Profit