Entrepreneur and avid explorer of entrepreneurial opportunities. Master of Business Administration & Sigma Beta Delta honors society member.
Teamwork is Essential
The simulation creates the environment for teams to immerse themselves in the collaborative nature of getting business done. To become successful at the simulation the first order of business is to integrate with team members and learn of the different ways that members complement each other. Teams become better assets than individuals when members are able to fit into the grooves of each other like the gears on a well-oiled machine. This will create synergy. The game requires a level of precision which can only be achieved if the team is pushing the same strategy; therefore, it is very important to select a strategy that is compatible with the various points of view of members. Diverse opinions should be encouraged especially if they are grounded in research. Follow the instinct that says there is a better option, always investigate this thought and never be afraid to challenge the soundness of a decision. For example, one team member offered the opinion that giving employees an increase in base wages would lower the total cost of compensation as well as the total cost of production. This notion was met with resistance but after toggling the percentage increase back and forth it became apparent that our team member who didn’t allow herself to be drowned out was well-informed.
Some Key Considerations For Teams
1. Whether to customize the firm’s offerings in each country's market to match local buyers' tastes or offer standardized products worldwide.
2. Whether to employ the same competitive strategy in all countries or to modify the strategy country by country.
3. Deciding where to locate facilities, distribution centers, and service operations to maximize locational advantages
Corporate Social Responsibility
The simulation involves CSR as the very first menu option. Thompson (2018) states that a company’s “license to operate” comes with an obligation to act as a responsible citizen and do its fair share to promote the general well-being of society and has the burden to operate honorably. A balance must be struck between how much a company can afford to spend on CSR before it becomes a burden on the business to the point it affects future growth and prevents the company from being equally committed to CSR in the future.
How To Win BSG Using the Best-Cost Strategy
The best-cost strategy means offering customers a product with the highest attributes of quality and style at a lower price thus allowing them to gain the best value for their money.
Recommendations for Improving the Image Rating in The Business Strategy Game
The best-cost strategy benefits the company’s image because increasing the S/Q rating while having a lower price is directly related to achieving a high image rating. If there are five groups competing in the market aim for at least 20% market share in each segment because being evenly represented across the geographical regions bodes well for the company’s overall image. If there are other groups pursuing the best-cost strategy try to be the first to get to 10 stars. CSR initiatives will boost the image rating but be cautious about how much you spend in this area.
Recommendations for Improving EPS, ROE, and Stock Price in BSG Simulation
Substantial growth in revenues and net profits will fuel tremendous growth in EPS and Stock Price. Therefore, growth-minded companies should consider expanding especially if plants are operating at over 80% capacity. The stock repurchase is also an almost instant way of increasing the stock price and EPS given the company continues to see reasonable growth. Remarkable growth minimizes the need to pay out dividends, but when growth begins to taper off, consistent dividend payments, as well as steadily increasing dividends by $0.05 year over year, will help stabilize the company’s stock price. On the other hand, an increase in the stock offering will allow the company to finance expansion at a likely cheaper cost than taking a loan but will dilute the EPS. Perhaps the most reliable way for a company to improve its financial performance over time is to recognize that a balanced scorecard approach to measuring company performance has much to recommend because pursuing and achieving strategic outcomes that boost a company's competitiveness and strength in the marketplace puts it in a better position to improve its future financial performance.
Masterful strategies come fromd oing things differently from competitors where it counts—out-innovate them, be more efficient, adapt faster—rather than running
Tips for Lowering Cost and Other Recommendations For Winning the Business Simulation Game
Toggle the advertising spending to see the lowest cost at which the company can achieve the desired market share. Turn delivery time to four weeks because it has no noticeable effect on sales but significantly affects EPS and Net Profit. Marginally reduce spending on retail support each year because it has a benign effect on sales. Toggle between each set of options on the branded production screen to see which combination of materials, styling, and TQM will be the most cost-effective for production. Do this for each simulated year because the cost of materials varies. Invest early in plant upgrades, especially the S/Q rating improvement. An early investment in these areas will allow the company to enjoy a return on investment for several years. The amount of loans the company carries has the greatest effect on the company’s Credit Rating. However, once an A+ Credit Rating is achieved it doesn’t get any better than that, therefore, instead of paying down loans consider stock repurchase or some other investment.
Employing a Blue Ocean Type of Offensive Strategy
This involves abandoning efforts to beat out competitors in the existing markets and, instead, inventing a new industry or distinctive market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand. Focus on making your product distinctive in terms of quality or style and pay less attention to out-promoting your competitors.
Winning a bigger market share is not a typical competitive weapon that a company can use to battle rivals and attract buyers.
Pitfalls to Avoid in The Business Simulation Game (BSG)
Do not neglect the information in the market snapshot but pay more attention to the footwear industry report rather than the portion that provides you with strength and weakness analysis, for example, advertising may be identified as a weakness, however, spending less on advertising while yielding better results than your competitors is actually an advantage. Investing in upgrades later in the simulation does not allow enough time to break even on the investment. Avoid spending too much on CSR. Be leery of how much is spent on celebrities because there are no metrics to calculate the usefulness of celebrity endorsements. Note well that lowering the internet price can cause the cannibalization of the wholesale segment because the gap between internet price and wholesale price is related to the number of retail outlets that will carry your footwear. The greatest pitfall to avoid is switching strategy because of poor execution.
Using The Footwear Industry Report To Put Things Into Perspective
Learning Which Rivals Have Winning Strategies And Which Ones Have Weak Strategies Is:
The managerial payoff from spending the time and effort to gather and digest competitive intelligence about rivals' strategies and situations and gain some inkling of what moves they will be making.
Understanding the Company Intelligence Report is Integral to Success
Understanding The Company Operating Report is Integral to Staying Ahead of The Competition
Questions & Answers
Question: What should my team do if two years in a row there were regions with fully depreciated equipment?
Answer: This is a unique situation I've never contended with before. I would suggest looking into upgrades that specifically improve plant operations. I hope other players will chime in with their comments on this.
Question: How can I increase market shares on internet and wholesales marketing?
Answer: The simple answer is to increase advertising spending but a comprehensive approach is needed to get the best results. Research your market, look at market intelligence reports to see what competitors are offering in terms of style and quality, how much are they spending on ads as well as how are they distributing their products. I have noticed that advertising spend and quality directly affect internet market share whereas, the cheapest goods will corner the wholesale market so you will have to manage your production/distribution accordingly. Pay attention to the needs of your customers as well as the capacity demanded by the market. Regarding the internet market, offering a superior product at the lower price than a competitor charges for an inferior product ensures that your products will be bought before the second tier product, however, selling at a lower price is not always the best idea for example, if North America needs 60,000 pairs of shoes but the total distribution of your company, as well as your competitors, is only 55,000 then each and every pair will likely sell regardless of the price.
Question: How can I reduce the cost per pair sold?
Answer: Early investments in upgrades to plants and training can pay big dividends in the following years by lowering the cost per pair. However, you must ensure that prior to investing in any upgrades that there is adequate time remaining in the simulation for ROI. "Expenditures for best practices training have four highly positive benefits in all plants: (1) helping curb reject rates associated with defective workmanship, (2) helping improve S/Q ratings for both branded and private-label footwear, (3) curtailing materials waste and potentially lowering material costs at the plant by as much as 20% annually over a period of years, and (4) increasing worker productivity up to a maximum of 2.2% annually. In Year 10, the company spent about $44 million on standard and superior materials, so making use of best practices training to achieve (over time) materials cost savings of even 5-10% annually (and maybe 15% to 20% annually over a period of years with an all-out long-term best practices training effort) is one way to achieve a sustainable cost advantage over rival companies." (Player's Guide, 2018) And as I mentioned in the article after each round of the simulation toggle between annual base pay increase, incentive compensation, best practices training, no. of models assembled. Workers' productivity is sensitive to your rivals' compensation package you will have to outdo them in this area as well to keep your people happy, your rejection rate lower and hence your cost per pair.
Question: How can I increase the net revenue of my business?
Answer: To increase your company's net income you should focus on improving your bottom line as well as your top line, try to trim labor, materials, warehouse, and delivery expenses. Optimize your advertising dollars by finding the balance between trimming excess spending, growing your market share and fetching the highest possible price for your products. Anticipate your competitors' strengths and weaknesses. Exploit areas where they are weak to gain market share or to increase profit margin. An underserved market will pay what you charge especially if you're the only player or if your product is significantly better than other offerings.
Question: How do I know what to put for competitive assumptions in the Business Strategy Game?
Answer: Understanding your competitors' strategy will help you to beat them. You will need to do a detailed analysis of the intelligence reports each time the simulation runs, in order to assume correctly what offensive and defensive strategies are most suitable. The items you're looking to derive these assumptions from include competitors prices (low price, low quality = wholesale strategy), large advertising spend correlates with internet expansion, geographic expansion raises the barrier to entry in that region and it could also mean that the competitor making such an investment is financially stretched and an opportunity exist for your company to put a hurting on them. Large stock buy-back and huge increases in dividend is an indicator that a competitor is struggling/will struggle to achieve growth and further efficiency because sufficient funds are not being invested in new factories, technology, training, etc. The timing of these assumptions are also important for example in the later years of the simulation is will just make more sense to invest in paying down debt, stock buy-back and dividend increase rather than new factories, training, and technology because there isn't sufficient time to achieve an ROI.
Question: How intricate are the quizzes in the Business Strategy Game?
Answer: For my class, the questions came directly from the BSG guide.
Question: We increased our S/Q however, our snap shot is below average. How can we fix this?
Answer: Quality best affects online sales, however wholesale is price sensitive. The actions of your competitors are likely hurting your scores, for example, if they have tweaked their production to create the same quality product at a lower cost then they will gain an advantage in several ways including higher ROI, more savings available for plant investments, debt servicing, advertising, stock repurchase, etc. React to your competitor's strategy, anticipate their next moves.
Question: My class will be limited to only playing through week 15, how do I need to alternate my strategy?
Answer: I would recommend initiating stock buyback right away. Do not invest in plant improvements/expansions unless you'll see an ROI prior to year 15. Focus on dominating the US, Europe, and Asia markets. Secure the best celebrity endorsements to help you achieve this goal, celebrity endorsements are a great boost for online sales. Year 14 into year 15 spend just enough cash needed to affirm an A+ image rating, pay down enough loans to secure a AAA/ A+ credit score. I hope this helps.
Question: How can I decrease days of inventory?
Answer: Great question, here is why; “allowing surplus inventories to grow out of control is costly in two respects. 1. Inventory storage costs on carrying surplus inventory from one-year to the next is $1.00 per pair (handling and storage of required inventory entails annual costs of $0.50 per pair). 2. There is a 1-star penalty applied to the S/Q rating of unsold branded pairs carried over to the following year—this penalty, which is part of the IFF’s S/Q rating formula, is to reflect the fact that unsold pairs are last-year’s models and styles, making them less attractive to buyers.” (Player’s Guide, 2018) Fix this by making sure you sell what you produce, and extending your delivery time may not affect you negatively and may benefit how much inventory you have to carry. People will wait for their favorite kicks, phone, games, gadget as long as it appeals to them.
Question: My team has placed at the bottom for the last 2 years, how do we improve our figures? I've tried most of what you suggested
Answer: Competitive and market intelligence will affect the nuance of your strategy. If your competitors are 'besting' you at applying their strategy then they will continue to dominate. Two competitors could apply a very similar strategy but one has the benefit of several celebrity endorsements whom they've locked into multi-year deals at low bids, therefore, they will enjoy a competitive advantage in internet sales in the regions where these celebrities appeals are most potent. They may also dominate the wholesale market simply because their pairs are $0.25 cheaper than every other company and if they have plenty of capacity to meet the demand of those markets then no one else's pairs will ever sell.
Question: Whats the best way to distribute pair per region?
Answer: This should be heavily dependent on market intelligence. Work with the forecast, as well as historical data; locate the markets that are underserved, focus on your strengths by maintaining dominance in markets where you do well, expand your footprint to markets where your rivals show weakness.
Question: How do I better my credit rating?
Answer: Pay down loans faster!
Question: How can I increase my credit rating?
Answer: Pay off your loans faster!
Question: How can I lower the warehouse costs when playing the Business Strategy Game?
Answer: Warehouse cost is a fixed cost. I believe what your're looking at lowering is the cost of having excess inventory on hand, and because some inventory is necessary in order to fill orders quickly... correctly forcasting sales is the only way to right size the inventory on hand.
Question: Is there any negative impact (this year or in the following ones if a take a loan as high as neccesary to repurchase as much stock as possible? EPS and ROE will increase and the following year I can sell stock to pay the loan and keep the earning due to stock price increase.
Answer: It’s an interesting gamble. If your speculation turns out to be correct then there are only a few drawbacks (1) Your credit rating will likely be impacted (2) When you sell shares it will dilute your stock value. It’s a bold move and I like it especially if it is done early when the stock price is cheapest.
Question: Do you have tips for the last year that can boost your company?
Answer: Significant stock repurchase will help to push up your stock price. Spending on employee ethics training, and green initiatives will improve your corporate image. In a dead heat race - all other things equal having the best Corporate image will give you the will with socially conscious investors.
© 2018 Angelo
Questions, Comments, and Other Tips are Welcomed
Angelo (author) from College Park, MD on July 17, 2020:
Early investments in training, machinery, trim cost, bolster revenue, stock buyback, maintain a good image.
SUSANA on July 14, 2020:
how to increase the ROE in the BSG?
Angelo on April 14, 2020:
The image rating is particularly easy to influence by spending on ethics training, eco-friendly packaging etc.
Niese on April 14, 2020:
It stands for Game-To-Date. Team is not doing well and need to increase our score, image rating.
Angelo (author) from College Park, MD on April 13, 2020:
Please expand the acronym GTD
Niese on April 09, 2020:
How do you improve your GTD when it is low.
Angelo (author) from College Park, MD on October 18, 2019:
Increase your spend on Corporate Social Responsibility initiatives such as recycled packaging.
sirena riggins on October 18, 2019:
How do you get your image rating to go up?
jose on July 16, 2019:
I. Want. Free. Gems
Angelo (author) from College Park, MD on March 06, 2019:
Post a specific question in the appropriate section of this article and I'll certainly reply for the benefit of all readers.
Support on March 05, 2019:
Hello..... How can we get your help? Thank you
Angelo (author) from College Park, MD on March 05, 2019:
Sorry Jay, I do not. However, I am contemplating doing a YouTube video.
Jay on March 05, 2019:
Hello! Do you provide audio chat sessions to help with BSG game ?