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Cadotte
Business Management
Competing in the Marketplace
Ernie Cadotte
Learning Strategy
Business war games are a form of combative
Learning Strategy:
Learn by Doing Participants learn about all aspects of business by managing a simulated business.
The Marketplace scenario follows the life cycle of a new product. Business decisions are introduced as they become relevant in the evolution of the product.
Copyright 2002 by Ernest R. Cadotte
Key Benefits
Develop teamwork across functions & locations. Promote better decision making by helping participants see how their decisions can affect the performance of others & the organization as a whole. Facilitate learning of important business concepts, principles and ways of thinking.
Copyright 2002 by Ernest R. Cadotte
Key Benefits
Develop strategic planning and execution
Key Benefits
Discover how important it is to use market data and competitive signals to adjust the strategic plan and more tightly focus business tactics.
Build confidence through knowledge and experience.
Business Team
Market
Opponent Opponent
Copyright 2002 by Ernest R. Cadotte
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 through: customer reaction to market decisions competitor actions Current situation is evaluated, strategy formulated, and tactics are 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.
Game Scenario
Your business strategy will be tightly focused on direct sales to business customers.
You will not sell to the home market or through retail stores. You will sell through company-owned sales offices in major metropolitan markets around the world.
Copyright 2002 by Ernest R. Cadotte
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 2002 by Ernest R. Cadotte
Sales Offices
Montreal Toronto Calgary Vancouver Paris Berlin Rome London
Market Segments
(Market Structure)
Mercedes
Traveler Innovator
Performance
Chronology of Events
Q1: Organize the team, name the company and contract for a survey of potential
customers.
Q2: Analyze market information, establish
Chronology of Events
Q3: Test-market brands, prices, ad copy, media campaigns, sales staffing. Determine production schedule for each brand.
Q4: Study end user feedback, competition, and financial performance and make adjustments in strategy.
Copyright 2002 by Ernest R. Cadotte
Chronology of Events
Q5: Prepare a two-year business plan. Present business plan and financial request to venture capitalists and negotiate equity investment. Q5 Q8: Initiate international roll-out
campaign.
Copyright 2002 by Ernest R. Cadotte
Chronology of Events
Q9: Prepare report to the Board regarding
second year performance deviations from plan justification for departures analysis of current market 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 and preferred stock.
Copyright 2002 by Ernest R. Cadotte
Performance Evaluation
Report to Board
Strategic thinking and tactical execution Balanced Scorecard- cumulative score for quarters 5 through 8 How well the company is prepared for the future
Set up shop
design brands for target market segments develop distribution strategy
locate and build plant open initial sales offices for test market
Copyright 2002 by 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?
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 2002 by 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?
Number of Peanuts
Copyright 2002 by 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 2002 by Ernest R. Cadotte
Rugged casement
Microcircuitry
Wireless modem
6-hour battery
Compact keyboard
Strategy
Feedback
BUSINES S LEVEL
Manufacturing performance Financial tactics Financial performance
Business Strategy
Business Performance
Market conditions
Market assessment
Market objectives
Marketing strategy
Marketing tactics
Market performance
Manufacturing conditions
Manufacturing assessment
Manufacturing objectives
Manufacturing strategy
Manufacturing tactics
Financial conditions
Financial assessment
Financial objectives
Financial strategy
Marketing & manufacturing tradeoff - satisfy the customer or run the most efficient factory Financial liquidity - cash versus assets Logistics of plant location - production versus shipping economies
Copyright 2002 by Ernest R. Cadotte
Contract for market research on customers and competition Check pro forma financial statements - All
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 2002 by 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 2002 by 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