VNU – International University
School of Business Administration
BA140IU
Business Game
VIETNAM NATIONAL UNIVERSITY – HOCHIMINH CITY
INTERNATIONAL UNIVERSITY
SCHOOL OF BUSINESS
BA140IU
Business Game
FINAL REPORT
HoChiMinh city, Vietnam
2012
VNU – International University
School of Business Administration
BA140IU
Business Game
GROUP MEMBERS:
Nguyễn Văn Vinh-BAIU09491
Nguyễn Hoàng Tuấn-BA070291
Lê Thị Bích Tuyền-BAIU08233
Lê Thị Thúy Hằng-BAIU08167
Nguyễn Văn Tuấn-BAIU09448
Lại Đại Nghĩa-BAIU09462
Nguyễn Thị Lan Anh-BAIU08006
Nguyễn Hữu Hùng-BAIU08131
Đinh Hồ Quang Vinh-BAIU08079
Nguyễn Thị Kim Thanh-BAIU09220
APPROVED BY: Lecturers,
1. Phạm Hồng Hoa
2.Patrick Trần
TABLE OF CONTENTS
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VNU – International University
School of Business Administration
BA140IU
Business Game
I.
OVERALL STRATEGY..........................................................................5
1.1 Differentiation strategy: Focusing on singles and others segments.............5
1.2 Gradually Expand To Other Segments..........................................................7
1.3 Entering Vodite Market as soon as Possible..................................................7
1.4 Focusing On Advertising and R&D ...............................................................7
II.
THE GAME PROCESS ...........................................................................8
2.1 Stage 1 ...............................................................................................................8
2.1.1 Period 1 .....................................................................................................8
2.1.1.1 Overview.
2.1.1.2 Decision.
2.1.1.3 Result
2.2 Stage 2 .............................................................................................................11
2.2.1 Period 2 ...................................................................................................12
2.2.2 Period 3 ...................................................................................................14
2.2.2.1 Decision.
2.2.2.2 Result
2.3 Stage 3 .............................................................................................................19
2.3.1 Period 4 ...................................................................................................19
2.3.1.1 Market overview
2.3.1.2 Decision summary.
2.3.1.3 Result
2.3.1.4 Reflection
2.3.2 Period 5 .................................................................................................22
2.3.2.1 Market overview
2.3.2.2 Decision summary
2.3.2.3 Result
2.3.2.4 Reflection
2.4 stage 4 (Include period 6, 7, 8, 9) .............................................................25
2.4.1 Period 6 .......................................................................................................... 25
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School of Business Administration
BA140IU
Business Game
2.4.1.1 Market share
2.4.1.2 Decision Summary
2.4.1.3 Result
2.4.1.4 Reflection.
2.4.2
Period 7 ......................................................................................................... 32
2.4.2.1 Market Overview
2.4.2.2 Decision Summary
2.4.2.3 Result
2.4.2.4 Reflection
2.4.3
Period 8 ......................................................................................................... 38
2.4.3.1 Market share
2.4.3.2 Decision Summary.
2.4.3.3 Result
2.4.3.4 Reflection
2.4.4
Period 9 ......................................................................................................... 42
2.4.4.1 Market Overview
2.4.4.2 Decision Summary
2.4.4.3 Result
2.4.4.4 Reflection
II.
LESSONS LEARNT ................................................................... 45
Lesson number 1 .........................................................................................................45
Lesson number 2 .........................................................................................................46
Lesson number 3 .........................................................................................................47
Lesson number 4 .........................................................................................................48
Lesson number 5 .........................................................................................................48
Lesson number 6 .........................................................................................................51
Lesson number 7 ........................................................................................................51
Lesson number 8 ........................................................................................................53
Lesson number 9: ......................................................................................................53
Lesson number 10: ....................................................................................................54
I.
OVERALL STRATEGY
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VNU – International University
School of Business Administration
BA140IU
Business Game
Throughout this game we are set our overall strategy focusing on 4 main aspects:
1. Differentiation strategy: Focusing on Singles and Others segments
2. Gradually expand to other segments, depending on capacity at the time
3. Entering Vodite market as soon as possible
4. Focusing on advertising and R&D
1.1 Differentiation strategy: Focusing on singles and others segments:
Base on Market forecast: single and others are two segments have the highest growth
rate in the long term (5 periods), so we want to focus on those two markets
MARKET FORECAST - SEGMENT SIZES AND GROWTH RATES
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Business Game
Segment
Column1
Column2
Buffs
Singles
Pros
Hi-Earners
Others
Total
Segment sizes in KU
Actual size this period
272
264
213
199
360
1,307
Forecasted size next period
287
351
283
287
480
1,688
Forecasted size in five periods
343
1,382
643
778
1,356
4,502
Actual size this period
20.80%
20.20%
16.30%
15.20%
27.50%
100.00%
Forecasted size next period
17.00%
20.80%
16.80%
17.00%
28.40%
100.00%
7.60%
30.70%
14.30%
17.30%
30.10%
100.00%
5.40%
33.20%
33.20%
44.30%
33.20%
29.10%
26.30%
424.20%
202.10%
291.00%
276.70%
244.40%
4.80%
39.30%
24.70%
31.40%
30.40%
28.10%
Relative segment sizes in %
Forecasted size in five periods
Forecasted growth rates in %
Next period
Total over next five periods
Average over next five periods
We also look at the characteristic of our products which do not allow us to enter to
high earner segment.
Firm
Brand
A
SAMA
SALT
SEMI
SELF
SIRO
SIBI
SOLD
SONO
SUSI
SULI
SYGU
SYCA
E
I
O
U
Y
CHARACTERISTICS OF MARKETED SONITE BRANDS
Physical characteristics
Max
Base
Retail
New or
Weight Design
Volume Freq
Power cost
price
Modified
(Kg)
(Index) (Dm3)
(KHz)
(W)
($)
($)
No
15
4
55
10
10
77
260
No
18
5
90
15
30
121
335
No
14
7
80
45
75
220
520
No
15
4
60
45
90
231
550
No
20
3
90
5
12
55
210
No
19
5
75
30
30
110
330
No
13
7
65
30
75
248
540
No
16
3
95
48
88
198
400
No
18
3
95
15
12
72
250
No
12
6
30
40
80
209
500
No
11
9
55
25
30
154
340
No
10
8
25
35
45
204
550
Fortunately, Market share of SIBI of period 0 is highest in single segment, so we
make a guess that the current characteristic of SIBI is most suitable for this segment
Since SIRO is most suitable to Others segment that is the reason why we chose these
two markets.
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Business Game
1.2 Gradually Expand To Other Segments.
Besides focusing on two segments Singles and Others, we also want to
expands and gain the market share from the other segments depending on capacity at
the time by using R&D. according to the table about MARKET FORECAST SEGMENT SIZES AND GROWTH RATES above, We see that the Hi-earners
segment also develop with the large percentages of growth rate. So, we will R&D the
product that suitable to this segment in the next periods.
1.3 Entering Vodite Market as soon as Possible.
Vodite market is called Blue Ocean market for the very fast growth rate.
We want to be a first mover in this market. Being a first Mover into Vodite market,
we will get some first mover advantages: Less competitors, more experience.
We will focus on R&D and introduce First Vodite products as soon as
possible (period 4)
1.4 Focusing On Advertising And R&D.

Focus on R&D in order to meet customer’s demands. Base on the ideal value
index, we will R&D the products that are same what the customer expectation
to attract them and gain the market share.

Advertising: We also emphasize on the advertisement to improve awareness
and perception of the customers.

Depending on the situation of each period such as market growth rate,
inflation rate, inventory…We decide Others like price, distribution…to fit the
situation.
II.
THE GAME PROCESS
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School of Business Administration
BA140IU
Business Game
Our process is best divided into 4 stages, based on our performance throughout the
game. Each stage saw a turning point in our performance (indicated by stock price
index) compared to the previous stage.
2.1 Stage 1:
In this first stage our group still struggled understand aspects of the game.
In the first meeting not every member of the group had read the handbook, thus made
it very ineffective. Due to this, we made several mistakes in this period which brought
our stock price index down.
2.1.1 Period 1
2.1.1.1 Overview. As other team, Team I began with 2 brands of Sonite which
are Siro and Sibi. However, each of them has different potential growth because of its
characteristics.Specifically, SIBI seem to be more profitable than its product line,
SIRO. In fact, SIBI acquired 10.4% market share out of 13.6% total market share of
Team I in Sonite market.
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Business Game
Market share
A
12.5%
Y
21.4%
E
17.2%
U
14.5%
O
20.7%
I
13.8%
Recently, Sonite market is relatively big and competitive with many
competitors and variety of products. Three segments can be considered as potential
for future growth are Single, high Earner and Others.
2.1.1.2 Decision.With the aim of enjoy the highest growth rate in the long
term (5 periods) of two segments single and others, we focus investment on those two
markets. Fortunately, our two products somehow fit with these two segments thank to
its common characteristics bringing the cost and price down to attract these two pricesensitive segments. Market share of SIBI of period 0 is highest in single segment
while SIRO is highest in others segment
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School of Business Administration
BA140IU
Business Game
In this first period, R&D is not available for all of us, target high Earner
seem to be far away our two cheap products, so giving up this fast growth may be
safer for our Team.
Using cost leadership strategy, we’d like to reduce the cost of investment
that a reason for us to reduce our advertising spending. In order to implement this
strategy we also consider the awareness our target customer toward SIBI and SIRO.
The ideal outcome from the study with very high awareness of Single for SIBI and
Other for SIRO has motivated us to cut our advertisement cost down.
Following our strategy of cost leadership, we decrease the price of SIBI
product. Moreover, our purpose of this reduction is attract customer in Single segment
who are sensitive to price.
For SIRO product, we want to increase a little bit in the price since SIRO
price is too low in comparison to other products in Sonite market and we also want to
avoid the effect of inflation so we decide to adjust the price 5% higher for this product
Testing the react of market is also a purpose for one price increase and
another decrease.
Setting production level in the first period is one of the hard jobs for us.
For SIRO product, we based on the purchase intention and market size to estimate the
number of production which is about 118000 units needed. However, in order to
avoid the inventory in the first period and forecast the effect of increase the price, we
reduce production level to around 90000 units.
As for SIBI, since we reduce the price, we believe that the market will
react positively, so we decide to increase our production to meet the new demand
The last decision for period 1 is distribution channel. The main distribution
channel was department store (over 40%). Beside that to maximize the volume of
sale, we also focused on special stores and mass merchandisers.
2.1.1.3 Result
Market share
Period 0
Period 1
Change
13.8%
11.6%
-16.4%
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Business Game
Shareholder value
$1000
$991
-0.9%
253458U
274619U
8.35%
Unit sold for SIRO
86270
67007
-22.32%
Units sold for SIBI
167187
207613
24.18%
Contribution
23901
29722
24.4%
Unit sold
Despite our effort of careful analysis, the Stock price fell to the lowest
rank (Preferred to the stock price index chart). This sad news can be attributed for the
volume sold of SIRO reduce 22.3% and the shortage of supply forthe brand SIBI, as a
consequence, inventory cost for SIRO arise while losing potential customers for SIBI
product.
Lessons learnt: After this surprising result, we realize the advertising plays
an important part in acquiring market share but we depreciate this role so affecting the
total sale a lots. Moreover, we should consider carefully before decide to change the
price because if we increase the price by 5%, its negative effect on sale could be
double or even greater, so don’t underestimate the effects of price.
2.2 Stage 2
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School of Business Administration
BA140IU
Business Game
After stage 1, our team failed in the game and stock price went down to the
lowest in the market. From the result of stage 1 we understood more and had
experiences in playing the game. The strategy that used in period 1 was not suitable
and made our performance decrease. So we decided to move in stage 2. Stage 2
include period 2 and period 3 because strategy and result were similar, moreover,
R&D was available first time in the market, that why our team in the stage prepare for
new project to get advantage from R&D as much as possible.
2.2.1 Period 2. At the beginning of period 2, segment Others and Singles
segment also got the largest size in the firm and they really like our products. About
market share, total volume sold of SIBI was 207613 units that was a big number
compare with 67007 units of total volume sold of SIRO. To fulfill large demand of
customer for SIBI products, SIBI production increased from 173000 units in period 1
to 300000 units in period 2. As the market size growth rate was increased 34.4%, we
expected that the demand for SIRO products also increase in period 2 so our team had
increased SIRO production from 90000units to 175000 units. Moreover, since SIRO
was also a good segment, we wanted increase number of customers for SIRO. To
make customers feel sensitive and get involve more in SIRO, the price of SIRO
products had decreased from $220 to $200 in period 2. Decreasing price was also the
way our firm reach others segment and singles segment.
In addition, R&D was
available here and from experiences in period 1, we see advertising and R&D play the
importance role in business. To fix the mistake in period 1, advertising budget
increased to $2000 and advertising research budget also increased to $90 for each
product. In period 2, we also wanted to get 40% singles in SIBI product and 40%
others in SIRO product. The customer segments was wanted to focus that was same in
previous time, so the distribution channel was not changed to suitable with demand of
customers
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Business Game
Table of decision making in period 2
SIRO
SIBI
Production planning
125KU
300KU
Retail price
$200
$325
Advertising budget
Advertising research budget
Targeted segments
Buffs
Singles
Professionals
Hi. Earners
Others
$2000
$90
15
25
10
10
40
$2000
$90
20
40
10
10
20
SIRO(%)
SIBI(%)
Specialty stores
30
70
Department stores
33
67
13
Mass merchandisers
40
60
VNU – International University
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BA140IU
Business Game
After period 2, our team got the first success in the game. Firstly that is the
stock price increased from $991 to $1059 because of the positive contribution from
both products. Next is units sold of SIBI increase to 273214 units. Others and singles
segments also like our products by consuming highest amount of products. Because of
using advertising and R&D in period 2, we success with high professional segment
use our products. However, the market share decreased to 10.6% compare with 11.6%
in period 2. The reason is that other firms growth very fast. The volume of our
products and customer was also low in the market. Also we decreased price of SIRO
in period 2 but at the end of period 2 the units sold of SIRO had decreased to
61515units. Our group thinks that because changing characteristics of SIRO product
was not really fit with the customer idea value
Tables and charts below show the detail of our result in period 2
Market share
Stock price
Retail sales
Contribution
Unit sold
Unit of SIRO sold
Unit of SIBI sold
Period 1
11.6%
991
80091
29722
274619
67007
207613
Period 2
10.6%
1059
98022
36937
334729
61515
273214
2.2.2 Period 3
14
Change
-7.9%
6.8%
22.4%
24.3%
21.7%
-8.2%
31.6%
VNU – International University
School of Business Administration
BA140IU
Business Game
In period 3, the increasing of market size of our total products as well as
Sonite is stronger than two previous periods. Particularly, market size of Total
increases from about 230 KU to
about 330 KU. And with Sonite,
market size increases a little less than
Total, about 300 KU. Moreover,
since we started a new project –
starting R&D products in period 2,
after a deep study about customers’
need and current market, there is
appearance of Vodite market in this
period. The total growth rate of our
products is about 43% while Sonite market only grows at the rate of 36%, less 7%
than total growth rate in the third period.
Similarly as the two first periods, the market size of two segmentations
(Others and Singles) increased well, continued to be leaders among five segmentation.
These segmentations grown with
the high rate and dominated in
Sonite market (Others was over 800
KU and Single was over 750 KU).
However, there was a small change
between
High
Earners
and
Professionals segmentation. Market
size of High Earners increased from
about 430 KU to about 540 KU, but
market size of Professionals had a
strong increasing, from about 250 KU to nearly 590 KU. Therefore, they converted
their position in market size in this period.
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Business Game
2.2.2.1 Decision. Besides keeping the same price of SIRO and SIBI
products as two previous periods ($200 for SIRO and $325 for SIBI), we decided to
reduce production planning of SIRO brand from 125 KU down to 20 KU. The first
reason is that we found reaction of customer with this kind of products was not good,
that led to reducing of our market share. Another important reason is that we intended
to withdraw SIRO next period because its characteristics didn’t fit customers’ need.
So, we need to keep SIRO inventory as low as possible. And since we also had high
SIRO inventory of previous periods, we just produced only 20 KU in this period.
However, forecasting high purchasing intention in SIBI product, we add
50 KU in production planning that means production planning for SIBI was 350 KU
in this period.Besides, market growth which was nearly 44% was also our advantage
to increase SIBI production planning.
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Business Game
In addition, knowing how important advertisement is, advertising budget
was increased to $2000 in both products to support better in sales and awareness of
customers. Although we keep the same total advertising research budget at price of $
90, we changed a bit in targeted segments. Particularly, our potential market
segmentations are Single and Others. Therefore, the costs of advertising research
budget for two segmentations were much more than three other ones (Buffs,
Professional, and Hi.Earners).
To make R&D Vodite product appear in market, since we didn’t have
much money in budget, we decided to take loan to start producing. So, we could enter
Blue Ocean market as soon as possible and enjoy the advantages such as few
competitors, high growth rate, etc. This table below includes our PVIDI products’
characteristics (autonomy, max Freq, Diameter, Design, weight, base cost). The index
of each characteristic in this product is developed from the combination of both deep
research in customers’ demand as well as market’s condition and information based
on innovator characteristics.
2.2.2.2 Result
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Business Game
As a result, our stock price increased thank to contribution of SIBI
product. Besides, effects of advertising and targeting right segmentation were also
other important reasons. We decided to keep advertising budget at $2000 to attract
more new customers as well as intensify our current customers’ awareness and
loyalty. And deep understanding our products and our customers’ need was also one
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Business Game
of
the
most
advantages
to
target
rightsegmentation.
2.3 Stage 3
A breakthrough! This is the most successful stage for us, as we saw our
stock price index jumped to the second place and maintained it for the whole stage.
This is also the stage that we started to explore Vodite market.
2.3.1Period 4
2.3.1.1 Market overview
Market share (SONITE)
MARKET SEGMENT SIZE (SONITE)
SIRO
2%
SIBI
11%
Other
brands
87%
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Business Game
For Sonite market, we have 2 main brands but our market share is pretty
small. They just capture 13% in total: Sibi 11% and Sida 2%.
In term of
segmentation, Single people is the fastest growth segment and take the biggest
percentage, the other segmentations like othetrs and high earners also in way of fast
growing.
2.3.1.2 Decision summary.The first thing we did in this period was to enter
Vodite market: We introduced VIDI. The reason behind this move is, as stated before,
we wanted to be among the first firms to enter this potential market in order to capture
the advantages of the first mover. Although in this situation we were no longer the
first mover (the first mover was team Y) still being the “second mover” brought us
many benefits: the market was still not very crowded, thus competition was not fierce;
growth rate was high. These encouraged us to make the move. Since this was the first
period we decided to target VIDI at innovators segment, then we would change to
other segments in later periods.
The second important decision was to withdraw product SIRO, replacing it
with SIDA and to modify product SIBI, basing upon the R&D projects we did in the
previous periods. We targeted SIDA at Others and the modified SIBI at Singles. The
reasons for this action are:
-
As for modifying SIBI: We simply tried to match the product better with Singles
segment, and at that time advertising alone would not be sufficient.
-
As for replacing SIRO with SIDA: We tried to match the product better with Others
segment. However unlike the case of SIBI at the beginning of the period SIRO’s
characteristics were too far away from the ideal points of Others, thus we decided that it
would take too long to bring customers’ perception from the initial point to where we
wanted. Therefore, we decided to simply give up on SIRO and started it over with a new
product: SIDA.
-
As a result of the modification of SIBI we believed that the change would cause the
demand of SIBI to increase therefore we also decided to raise its production. We also
decided to increase its advertising to inform customers about the new modification.
2.4.1.3 Result
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21
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Business Game
- In this period we have a big change in stock price (1080 in period 3, 1729 in
period 4 – increase 649).
- Total market share: increase 86,6%
- Retail sales: increase by 148.1%
- Stock price index: Increase by 60%
2.3.1.4 Reflection
It can be seen clearly that this period was a great success to us, as our
stock price index increased substantially, and we jumped to the second position. The
reasons behind that success was very simple: Our product portfolio decisions, as a
whole, were very effective. VIDI were a huge success, as the market was just as
promising as we expected. The modification of SIBI was also successful, as sales
grew greatly. SIDA had not made a profit yet this period. However in later periods it
would turn out that we made a correct decision with this product.
2.3.2 Period 5
2.3.2.1 Market overview
Market share (SONITE)
SIBI
11%
MARKET SEGMENT SIZE (SONITE)
SIDA
2%
Other
brands
87%
22
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Business Game
For Sonite market, we have 2 main brands but our market share is pretty
small. They just capture 13% in total: Sibi 11% and Sida 2%.
In term of
segmentation, Single people is the fastest growth segment and take the biggest
percentage, the other segmentations like othetrs and high earners also in way of fast
growing.
Market share (VODITE)
MARKET SEGMENT SIZE (VODITE)
VIDI
33%
Other
For Sodice market, the only brand Vidi did a good job when it takes a
brands
67%
certain proportion
33% of the market. The segment Followers appears as the rapidly
growing and is a crucial customer for the market.
2.3.2.2Decision summary. Two decisions were the most important to us in
this period: Adjusting production of SIBI and SIDA, and changing the target of VIDI.
-
Increasing SIBI production an decreasing production of SIDA: This was simply a
reaction to the previous period’s sales. With SIBI due to the increase in sales in
the last period we expected sales this period to keep increasing. With SIDA we
decided to lower its production due to its high inventory.
-
Changing the target of VIDI to followers: Although the introduction of VIDI to
Vodite market was a great success, and we got big shares in innovators segment,
the biggest segment in this market was actually Followers. In the previous period
we had to target Innovators because it was the first time we entered this market,
and as explained in the handbook the other segments would not buy the product if
innovators had not bought it first.
2.3.2.3 Result
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 Compare with the period 4, in this period, stock price increase 485 (1729 in
period 4, 2214 in period 5).
 Total market share: decrease 5%
 Retail sales: increase by 49.9%
 Stock price index: Increase by 28.1%
2.3.2.4 Reflection
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
In this period we still benefited from our actions in period 3. The growth of
Vodite market ensured our sales. In short, we were getting our high investment
from period 3 back. The blue ocean was proving to be very profitable for us.

However in terms of market share the result was not very good at all. Although
we decided to target innovators segment we did not compete very well with
group Y (particularly in price). At the same time since we targeted Followers we
left Innovators and adaptors undefended, thus when group U entered this market
we lost some market shares to them.
2.4 stage 4 (Include period 6, 7, 8, 9)
This is the last stage of our performance. Unfortunately we did not
perform very well here, dropping from second place at period 5 to fourth place at the
end of the game.
1.4.1 Period 6
2.4.1.1 Market share
SONITE
MARKET
SIBI
SIDA
Other brands
9%
89%
25
2%
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Business Game
For Sonite market, we have 2 main brands but our market share is pretty
small. They just capture 11% in total: Sibi 9% and Sida 2%. In term of segmentation,
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single people is the fastest growth segment and take the biggest percentage, the other
segmentations like othetrs and high earners also in way of fast growing.
VIDI
Others
20%
80%
For Sodice market, the only brand Vidi did a good job when it takes a
certain proportion 20% of the market. The segment Followers appears as the rapidly
growing and is a crucial customer for the market.
This was also the first period that our group reached the maximum
budget limit.
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2.4.1.2 Decision Summary

In this period we decided to launch a new R&D project, aiming to
exploit the remaining sonite market. We found Buff (Sonite market) as a very
interesting segment. Although in the long term this segment had the least growth
compared to others in the market apparently other groups thought so too and thus they
did not bother entering this market, except group E whose product fit with this
segment from the beginning. Therefore, competition in this segment would be much
less intense than other segments, with group E being our only potential competitor.
Moreover, since customers in this segment demand less from their products than
segments such as high earners or professionals the cost of R&D in this market should
be lower. Therefore our group decided to challenge group E head on and launched a
new R&D project called SIKE.
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Physical Characteristics
Name Weight
Design
Base Cost $
Volume Max Freq Power
Minimum
Current
(Kg)
(Index)
(Dm3)
(KHz)
(W)
15
5
49
42
84
PSIKE
realistic
282
282
Another important decision by our group in this period was that when we
looked back at the previous periods we observed that the increase in our sales force
and advertisement did not match with the growth in our production. Moreover, with
the great increase in budget we then had enough money and decided to utilize that
money to increase our market shares.Therefore, we decided to increase the salesforce
by 68% as well as a greatly increase advertisement budget.
 For the rest, we allocate the resourse as following:
Period 6
Price
Production
SIBI
325
159-173
SIDA
220
100-90
VIDI
750-650
500-700
Advertisement Market target
3000-3500
3500-4000
4000-
Single
Others
Followers
5000
VIVU
700
400
29
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Innovators
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Specialty store
Department
Mass
SIBI
12
20
25
SIDA
5
10
13
VIDI
33
20
16
VIVU
24
10
7
2.4.1.3 Result
1
Stock price: 2112 , reduce 102( compare period 5 )
2
Total market share: reduce 7,8%
3
Total market share reduce by 7.8%
4
Volume sold: SIBI increase 51,4%, SIDA increase 154,4%, VIVU reduce 4,6%
5
Market shares: SIBI increase 8,1%, SIDA increase 4,2%, VIVU reduce 12,9%
6
Net contribution: SIBI increase 57,1%, SIDA increase 104,7%, VIVU reduce
34,1%
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2.4.1.4 Reflection.The period was clearly a failure of ours. We believe the
followings were the primary reasons behind this:
Our group’s inventory made a huge jump this period. As reported, we are
the company who had the highest inventory cost in the market. Most of the inventory
was VIDI. The reason for this was because of our ineffective strategy compared to
group Y, our only competitor at that time in Vodite market. While our VIDI’s price
was, by far, not matched with demand from followers segment we wrongly decided to
aim it at this segment and could not compete with Y. To make things worse, we were
so confident in the success of this move, mostly due to the unbelievable growth rate of
followers segment we decided to greatly raised VIDI production. The result was clear:
We produced a lot and sold a little, which led to high inventory.
We failed to anticipate and capture the incredibly fast growing others and
singles shares. This resulted from the fact that we did not pay enough attention to our
competitors’ action. In this case, again it was group Y’s action that we failed to
account for. Later we discovered that in this period group Y left Sonite market, thus
leaving lots of room for other firms to grow. A correct response to this would be to
increase sales to fill the vacancy left by Y, which would greatly increase sales and
market shares. However, since our group did not see this we missed this great
opportunity.
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All in all lead to a poor use budget and quite low return on
investment.
1.4.1 Period 7
Period 7, the in-class contest, is a big event. Our group really wanted to
get the budget bonus, and we were confident that if we could at least keep the pace of
the previous periods there it would be possible for us to win the contest. The
preparation for this period had already begun in period 6, when we made various
moves that would ensure our victory in period 7 (or so we thought).
So, to better prepare for the period in period 6 we did the following:
R&D a new Sonite product, SIKE, with the aim to introduce it in period 7. Apart from
the purpose mentioned above this was also a direct challenge to team E, which was
the team right below us in terms of stock price index in period 6.
-
In order to have deeper understanding of the other group’s actions to improve our
decision making in period 7 we decided to purchase 2 studies that we had never
purchased before: Competitive advertising and competitive sales force.
-
In terms of group work before the contest our group decided to split the group into two
halves: one would play Sonite and the other would be responsible for Vodite market. This
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was because to the time constraint of the in-class contest. We hoped that this would help
us save time for making decisions.
2.4.2.1 Market Overview
SIBI
SIDA
Other brands
17%
6%
77%
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For Sonite market, the performance was in well progress. Brand Sibirose
from 9% to 17% and brand Sidi rose from 2% to 6%. In the segmentation, there was a
significant reduction of Single and High earners after they reached their peak point.
Professional kept growing while the Others reduced slightly.
VODICE MARKET
VIDI
VIVU
Other brands
2%
7%
91%
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For Vodice market, we only captured a small proportion in total with two
brands, decline from 20% to 9%, 7% and 2% respectively for Vidi and Vivu.
Follower still grew steeply, dominating aggressively the others.
2.4.2.2 Decision Summary

SIKE was available in this period so we decided to proceed with our plan and
introduced the product to the market, aiming at Buff.

As for Vodite market, we decided to try to gain back our position in this
market. However we were not patient enough to wait for another period for a
R&D project. Instead we decided to immediately launch two new Vodite
products: VISO and VITU, both based on the characteristics of VIDI. We
aimed these two new products at Followers. The reason for this choice, firstly,
as stated above, was because we were not patient enough to wait for another
period for a R&D project; secondly, compared to VIVU VIDI were more
successful, with less cost. For those reasons we thought it would be
appropriate to base our new product upon VIDI. This was merely a short term
effort.

However we also realized that while VIDI had least cost compared to others in
our production line, its cost was still significantly higher than those products
of group Y, our current direct competitor in this market. Therefore in order to
really compete with Y in the long run we decided to launch another R&D
project, aiming at cost reduction, called VIGI.
Physical Characteristics
Name
Autonomy
(M)
PVIDI 75
PVIVU 75
PVIGI 75
Max
Freq
(KHz)
14
14
14
Base Cost $
Diameter Design Weight
(Mm)
(Index)
(Kg)
Current
Minimum
realistic
64
40
64
533
608
493
493
538
493
6
7
6
55
55
55
The table below summarizes resources allocation in this period:
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Period 7
Price
Production
Advertisement
SIBI
325
150-173
3500
Market
target
Single
SIDA
220
100-90
4000
Others
SIKE
450
150
2000
Buff
VIDI
650
300
4000
Followers
VIVU
700
0
3500
Follower
VISO
580
200
2000
Follower
VITU
600
180
2000
Followers
Specialty store
Department
Mass
SIBI
10
22
24
SIDA
5
13
16
SIKE
3
6
5
VIDI
22
18
10
VIVU
22
14
7
VISO
4
5
3
VITU
4
5
5
2.4.2.3 Result
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 Stock price :2285,increase 172( compare period 6 )
 Total market share: reduce 26,9%
 Volume sold: SIBI increase 63.6%, SIDA increase 50%, SIKE(newly introduced
products) increase 100%, VIDI reduce 14,6%, VIVU increase 20,7%, VISO (newly
introduced products) increase 100%, VITU (newly introduced products) increase 100%
 Market shares: SIBI reduce 0,8%, SIDA reduce 0,8%, SIKE (newly introduced products)
increase 100%,VIDI reduce 4,1%, VIVU reduce 12,9%, VISO (newly introduced
products) increase 100%, VITU (newly introduced products) increase 100%
 Net contribution: SIBI increase 57,1%, SIDA increase 104,7%, SIKE (newly introduced
products) increase 100%, VIVI reduce 34,1%, VIVU increase 16,8%,VISO (newly
introduced products) increase 100%, VITU(newly introduced products) increase 100%
2.4.2.4 Reflection
 We were too rush in our decision to introduce VISO and VITU, epspecially our decision
to target them immediately at Followers segment. We forgot what it said in the handbook
“Followers will only use a product after Innovators and Adopters had used it” and thus
did not spend enough effort on these two segments. To make things worse, we failed to
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anticipate group E’s enter this new market. Their enter effectively brought our shares in
Innovators and Adoptors down, which in turns hurted our shares in Followers.
 All of our Vodite products were priced too high compared to our competitors, and too far
away from our targeted segment, Followers. This was bad because price was the most
important attribute with Followers, and other groups beated us in it.
 Our Sike was poorly advertised. We made a silly mistake here by forgeting to set the
perceptual objective for it. The result was that SIKE only got 0.3% of market shares in
Buff.
2.4.3Period 8
2.4.3.1 Market share
SONITE
MARKET
VODITE
MARKET
Chart Title
5.30
16.00 0.10
3%1%1%
0%
SIBI
VIDI
SIDA
VIVU
SIKE
78.60
VISO
others
VITU
95%
OTHERS
Our market share in both market had decline gradually. That total small
part had devided into smaller piece for each brand. This was most cearly seen in
Vodite market.
2.4.3.2 Decision Summary. After 2 continous period with ineffective
performance of many brands, as this period we came up with many tough decision
which reduced the cost and enduced the efficientcy and the effectiveness.
 Withdrawing VISO: VISO, along with VITU, were two short-term strategy products that
we introduced in period 7. In turned out that this move was a failure as both products
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failed to capture enough market shares and had negative contribution so we decided to
withdrew them from the market to prevent further loss. However at that moment our
group were a little bit undecicive and did not have the courage to withdraw both products.
To us it sounded like admiting our defeat, so instead we only decided to withdraw the
product with more negative contribution, which was VISO. As for VITU, we observed
that the negative contribution were not very serious, and its contribution before marketing
were still positive, we decided to keep it and tried to improve the situation instead by
lower its marketing budget.
 We also decided to reduce SIKE, VIVU and VITU. This was because we still got high
inventory for those products, so we wanted to sell out the inventory first.
BENCHMARKING – ESTIMATED OVERALL PERFORMANCE
Unit
A
K$
-12
E
I
O
U
Y
Inventory holding cost
-6,141 -13,513 -2,632 -4,866
-1
 We also decided that, despite the last period’s cost reduction R&D the cost was
still too high, therefore lowered our profit as well as prevented us from pricing
lower in order to compete with other groups. For that reason in this period we
decided to lauhcn yet another R&D project, aiming at lowering the cost.
Physical Characteristics
Name
Auton
Max
omy
Freq
(M)
(KH
z)
Diameter
Design
Weight
(Mm)
(Index)
(g)
Base
Allocated
Cost$
BudgetK$
Current
Minimum
realistic
Cumulative
PVIDI
75
14
64
6
55
594
550
10,000
PVDI1*
75
15
70
7
90
434
434
8,000
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The table below summarizes our brand management decision in this period:
Perio Producti
Change
d8
in
ge in ent
ge in segment
producti
price
ad
on
Price
Chan
Advertisem
Chan
Target
on
P7
P8
90
150
0
0
SID
30
600
A
0
SIK
15
E
0
VIDI
30
SIBI
5
400
67%
100%
-97%
33%
0
VIV
20
U
0
60
-70%
P7
P8
32
36
5
5
22
24
0
5
45
50
0
0
65
63
0
0
70
70
0
0
P7
P8
12%
3500
3000
-14%
Singles
11%
4000
3000
-25%
Others
11%
2000
2000
0%
Buffs
-3%
4000
3000
-25%
Followe
rs
0%
3500
3000
-14%
Early
Adopter
s
&
Followe
r
VIS
WIHTDRAW
O
VIT
18
U
0
70
-61%
60
65
0
0
8%
2000
1500
-25%
Early
Adopter
s
2.4.3.3 Result
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 Stock price: 2798, increase 513
 Total market share: reduce 14,2%
 Volume sold: SIBI increase 8,9%,SIDA increase 0,0%,VIDI increase 53,7%,
VIVU increase 1,6%,VITU increase 16,7%
 Market shares: SIBI reduce 4,2%, SIDA reduce 1,7%, SIKE reduce 0,1%,
VIDI increase 0,7%, VIVU reduce 0,2%, VISO reduce 100%, VITU increase
0%
 Net contribution: SIKE ,VIVU ,VITU Low market share, negative
contribution
2.4.3.4 Reflection
 We suffered a lot of loss in this period, including:
+ Withdrawn VISO :The obsolete inventories were sold to a trading company
at 80.0 % of transfer cost->an exceptional cost of K$6371)
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+ 142000 units of brand VIDI's inventory were sold to a trading company at
80.0 % of transfer cost->inventory disposal loss of K$6949.
+ 115000 units of brand VITU's inventory were sold to a trading company at
80.0 % of transfer cost->inventory disposal loss of K$5628.
 We were to pessimistic about VIDI’s situation, miscalculating its next period’s
sale and thus we sold all of its inventory and did not produce enough. This led
to us not having enough products to sell, losing potential profit and market
shares to our competitors.
 On the bright side, although our market shares reduced, due to out bad
decision making, our sales still increased, due to the overall increase of market
size, both in Sonite and Vodite market.
2.4.5
Period 9
2.4.5.1 Market Overview
SONITE MARKET
VODITE MARKET
3.9 10.3
11.8
3.6
0
VIDI
SIBI
VIVU
SIDA
VITU
SIKE
OTHERS
OTHERS
84.6
94.8
2.4.5.2 Decision Summary:
As this was the last period there would be no long-term strategy for this.
All of the things we did here were to increase stock price as much as possible at the
end of the period.
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 The first significant decision was to modified brand VIDI, based on R&D
project VDI1. The aim of this was to reduce the cost, and thus, the price of the
product in order to capture more market shares.
 In an attempt to increase total net contribution, and thus, stock price index, we
decided to withdraw all products that had negative contribution in this period,
which included SIKE, VIVU and VITU. This action left us with only 3
remaining products: SIBI, SIDA and VIDI. We also decided to invest more
into these 3 remaining products by increasing its advertising budget.
The table below summarized our decisions made in this period.
Period 9
Price
Production
Advertisement
Market target
SIBI
360
1500
3000-3500
Single & Others
SIDA
245
500
4000-3500
Others
VIDI
630-550
800
3000-4000
Followers
2.4.5.2 Result
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1.
Stock price:2602, reduce 196( compare period 8 )
2.
Total market share: reduce 30,8%
3.
Volume sold: SIBI increase 37,2%, SIDA reduce 37,5%, VIDI reduce 11,7%
4.
Market shares: SIBI increase 1,4%, SIDA reduce 1,8%, VIDI reduce 1,4%
5.
Net contribution: SIBI increase 35,63%, SIDA reduce 64%, VIDI reduce
11,1%,
2.4.5.3 Reflection.There were 4 main reasons for our failure in this last period:
1.
High inventory holding cost: Despite our effort we still failed to deal with
inventory problem. In particular, although we desperately sold all invetory in
the last period, our forecasting for this period was wrong, which lead to us
adjusting production incorrectly, which in turn left us with high inventory
again.
2.
Growth rate of both market is low: In the last periods while our market shares
decreased we still benefited from the overall increase of market size, thus while
our market shares reduced sales never stopped increasing. Unfortunately for us
in this period the growth rate of both market slowed down, making our sales in
both market reduced.
3.
Despite our best effort the price of our VIDI were still higher than other
competitors in the market, and far away from our targeted customer’s ideal
value point. This was due to our failure to significantly reduce the cost of
production. The reason behind this was because although we tried to reduce
cost by using R&D, at the same time inflation raised the cost. Worse, while
other succesful groups (for example group Y) benefited from extensive
production, which caused economics of scale bringing thee cost down, our
group, in an attempt to control inventory, always kept our production low.
4.
The decision to withdraw the products with negative contribution was a huge
blunder. Although we did manage to keep our net contribution high the fact
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that we withdrew many products left room for our competitors to grow. Again
we failed to take competitors into account when making decision.
III.
LESSONS LEARNT
Throughout this game our group made lots of decisions, good and bad.
Regardless of how a decision turned out to be it taught us lots of things. In this section
we will discuss the lessons we have learnt throughout this game. We hope that this
will not only help ourselves, but also will be valuable for other groups who will take
this course in the future.
Lesson number 1: Advertising and R&D are keys to success
The very first lesson that our group learnt is very simple: the importance
and power of advertising and R&D to your success. We learnt about the lesson of
advertising after the first period. As mentioned above in the first period in an attempt
to lower the cost our group foolishly decided to lower advertisement budget, while
other groups increase theirs (this although we did not purchase the industry
benchmarking we knew by discussing with our friends in other groups). The result
was devastating, as we dropped to the bottom of the market. Fortunately we learnt this
in time and were able to improve the situation in the following periods. Of course,
good advertising does not only mean throwing lots and lots of money into your
budget, but also means knowing where to put your money (i.e. distributing the budget
among the segments) and knowing the right message to communicate to customers
(i.e. choosing the perceptual objectives). While we in fact did consider these two
factors during the game, unfortunately only after the game had been over we learnt
that our effort was still not good enough( we learnt this again by discussing with
friends from other groups). In particular, when distributing advertising budget, while
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we did try to have a focus on our target segments, the focus simply was not strong
enough (when we discussed with the winning teams we learnt that the focus was
really strong in their case, sometimes they may target 100% or their budget at target
segment).
On big mistake: We did not read the handbook carefully enough and
missed the information on the usefulness of advertising research (which improves the
effectiveness of your advertisement) and therefore throughout the periods we did not
invest in this, neither did we pay any attention to it. The result, as revealed in the
industry benchmarking when we actually purchased it (this is another issue which will
be discussed later) was that over time our advertising effectiveness become poorer,
despite us continuously increasing advertisement budget.
R&D is also very important, if not even more important than advertising.
However, unlike advertising, which would have immediate effect, R&D required 1 or
2 periods to really take effect. However, the benefit brought from R&D, if executed
perfectly, is much more than what advertising may bring. We learnt this from our
success with our R&D, especially the first Vodite product, VIDI, and the modification
we did with SIBI and SIDA, both turned out to be great success.
Lesson number 2: Knowledge is power
The second is very simple: In order to win the first thing you need is
completed and correct information. This may sound basic but is actually one of our
group’s biggest mistakes throughout the game. Almost throughout the 9 periods of
playing the game we only purchased the most basic studies, for example consumer
survey or semantic/multi-dimensional scaling, while leaving out many important
studies, such as conjoint analysis, industry benchmarking, advertising/ sales force
experiment. Sadly we only learnt the usefulness of these studies in the last period,
when Professor Patrick sent us all the studies for period 9, which was too late for us.
This means that throughout the 9 periods we had to guess a lot, and many
of them, sadly, were wrong. Without industry benchmarking it was really hard to
understand what the competitors were doing, and also we could not learn anything
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from our competitors. Without conjoint analysis we did not really know what
customers paid attention to the most in the products (although the semantic scale did
help us a little in this regard). Without experiments we did not really understand how
and how much to set up our advertising or sales force. What we usually did was,
whenever we wanted to change our budget or something we only guessed the amount(
“Ok in the last period I think we did not advertise enough, so I think this period we
should increase the budget by, let’s see, $1000 sounds fine to me, anyone disagree?”)
Had we decided to buy these studies we are sure we should have
performed a lot better.
Lesson number 3: Always keep track of competitors’ action
This is, to some extent, part of the previous lesson. Although we could
somehow guessed competitors’ actions based on the most basic studies (for example,
market share or semantic scale) it was certainly not sufficient. Only after we had
purchased the industry benchmarking and then competitive advertising/ sale forces
that we realized the usefulness of these studies. Sadly, even after we have purchased
those studies we still made mistake by not paying enough attention to them, but
instead most of the time we still kept basing on the basic information to make
decisions. This was especially true in the in-class context, when the time pressure did
not allow us to look at every detail in the report. In particular, there are two specific
cases that best illustrate this lesson for us:
The first situation was in period 6. That was when group Y decided to
leave Sonite market in order to focus on Vodite. Naturally this should have been a
great chance for other groups in Sonite market, as it would leave a lot of market
shares for them to exploit. The correct response to such a situation would be to
increase production to keep up with the sudden growth in customers’ demand.
As it turned out, customers’ demand (expressed by purchase intention)
increased substantially. Unfortunately as our group could not notice this change we
did not made the correct adjust to our production. The result was that, although
customers’ demand increased, our production could not keep up with that and we lost
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lots of potential profit, and more importantly, we lost market shares to other groups,
especially group O, who was fully aware of the situation.
Another case was when we failed to react to group E’s movement when
they attempted to enter the Vodite market. This was a big mistake from us as at that
point in time our group did purchase the industry benchmarking, and based on the
sudden jump in group E’s R&D budget we was aware of group E’s ambitious to enter
Vodite market. However, eventually we forgot about that (this again had to do with
the pressure of period 7’s in-class context). The result was that we lost a fair amount
of market shares in Innovators segment to group E.
Lesson number 4: The market does not stay the same over time
When we first R&D our Sonite products we based the characteristics of the
project on customer’s ideal value at the same period, while what we should have done
instead was that we should have based the characteristics of the project on the period
that we planned to introduce the product. The result of this was that our product did
not meet the target segments’ ideal value, which resulted in the reduction of
effectiveness of the first Sonite R&D. In fact, our first Sonite R&D did not produce
the result that we aimed for.
In particular, the purpose of project SIBI2 was to modify SIBI to improve
segment Single’s perception toward this product. However, after the modification
SIBI’s shares in Singles segment reduced by 5%. Fortunately for us, while ideal
points of Singles changed, so did those of the other segments, especially Others. Just
by luck, the modified characteristics of SIBI met the ideal value of Others segment,
which then increased its shared in Others by 3%. In total, SIBI’s shares increased by
19.4% (but again this was pure luck rather than us making a right decision).
In short, the lesson we learnt here was: Always look into the future, rather
than the present.
Lesson number 5: Best product sometimes are not enough, it is the
product that best satisfy customers’ demand that will prevail
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This is a rather interesting story for us. By best product here we mean the
product that has all of the characteristics regarding quality perfectly match with
customers’ ideal points. We got such a product with PVDI1. Compared with the
market leader at that time, we actually got a better product than them, in terms of
quality:
Firm
Brand
Autonomy
Max
Freq
Diameter Design Weight
Retail
Base cost price
I
VIDI
75
14
64
6
55
425
750
Y
VYTO
75
14
70
6
100
369
407
Looking at the above table, it can be observed that VIDI and VYTO got
pretty much the same characteristics but diameter and weight. Looking at the
perceptual maps below, it can also be observed that in terms of diameter and weight
we got a better product than Y.
Overall in terms of quality we did a better job than Y. However it turned
out that VYTO was more successful than VIDI. The reason for this was because of
the difference in the price. In terms of price VYTO fit better with customers’ demand
than our VIDI.
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VNU – International University
School of Business Administration
BA140IU
Business Game
But customers value price much more than diameter and weight, by
looking at the conjoint analysis table below, which illustrated the importance of
various product’s characteristics toward customers:
Segment
Autonomy
Max Freq
Diameter
Price
Total
Innovators
21.80%
34.10%
3.20%
40.80%
100.00%
Adopters
16.50%
35.40%
2.60%
45.50%
100.00%
Followers
18.30%
29.60%
3.00%
49.20%
100.00%
It can be observed that, to customers price is the most importance
characteristics, much more important than diameter (weight wasn’t even in the
table).We satisfied customers in terms of diameter/weight, but lost in terms of price.
But price matters more to customers than diameter or weight, so ultimately we lost.
It was not that we did not know about the importance of price; however
our mistake was that we failed to take price into account when launching the VIDI
R&D. We tried to make a perfect product, but that ambition proved to be our undoing,
as a better product meant a higher cost and ultimately, a higher price. If we had a
chance to play it again we would sacrifice diameter and weight in order to reduce the
cost, and thus, the price of the product. This was really a costly lesson for us.
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VNU – International University
School of Business Administration
BA140IU
Business Game
Lesson number 6: Sacrifice short term benefits for long term gain:
The next lesson actually came from what we did right. Again this is related
to R&D. In the first Vodite R&D at first our group was undecided as to whether we
really wanted to invest that much money into this project, as the amount required
exceeded the budget and we had to borrow money. Back then our group was really
concerned about two things: our ability to pay off the debt in the future and our stock
price at the time. At first we were afraid that
Looking back at the game now we believe that in terms of decision making
stage 2, instead of stage 3, is the most successful. In stage 2 not only we were able to
fix the errors we made in period 1 and learnt more about playing the game, the
decisions we made in that period also greatly benefited us in the long run. In stage 3
we merely benefited from the correct decisions made in stage 2.
Lesson number 7: Teamwork:
There are two phases in our teamwork during the 9 periods of the game:
Before and after the midterm presentation.
Before the midterm presentation our group was divided into two subgroups:
+ The “play” sub-group, which consists of 4 members: This group is
responsible for playing the game.
+ The “work” sub-group, which consists of 6 members: This group’s
primary task is to prepare for the midterm presentation.
This system worked well for us, as we were able to prepare for the
presentation as early as the course started, while the size of the “play” subgroup
proved to be ideal, as we were able to both came up with many options and made
decision quickly.
After the midterm presentation our group again was divided into 2 subgroups:
+ 1 sub-group is responsible for playing Vodite market
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VNU – International University
School of Business Administration
BA140IU
Business Game
+1 sub-group is responsible for playing Sonite market
At this point the system we used in the first half of the course proved to be
a problem after the midterm presentation, as members from the “work” sub-group
then did not really understand the game and the strategies of the team, and we did not
paying much attention to explaining to them those things. Although we tried to put 2
of the members of the old “play” group in each of the new sub-group so that they
could guide the other members it turned out that most of the time it was the old
members who did most of the job while the other members were confused. Things got
worse as in the final presentation and report required members to fully understand the
game the group’s performance clearly. Our group tried to solve this by again dividing
the work: the old members of the “work” group would be mainly responsible for
describing the figures and process only, while the old members of the “play” group
would be responsible for explaining the strategies and reasons behind decisions or
results. Still during the process this caused a lot of confusion and misalignment
between members’ work, which took us quite some time to solve.
The lessons here: We should have let all members involve in the decision
making process, or at least should have spent more time explaining to them.
Another lesson was that all members should understand clearly all aspects
of the game. This was not the case in our group. At the first period not all members
had read the handbook thus in our first meeting most of the time was wasted on
explaining things in the handbook to each other. The result was clear: We were the
worst group in period 1. Fortunately as the game proceeded members started to read
the book and understood the game more. However as the game approached the last
periods a new problem emerged, as each member of the group started to specialized in
a specific task (for example, one member was specialized in making sale force
decision, the other was specialized in making advertisement decision, etc.). In
principle this may sound like good practice however it turned out that each member
only focused on his or her task only and did not pay much attention to the others. This
resulted in the lack of criticism on each others’ work in meetings, which reduced the
effectiveness of our decisions.
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VNU – International University
School of Business Administration
BA140IU
Business Game
In short, the lesson here is: Each member has to be aware of the big
picture, and understand all aspects of the game.
Lesson number 8: How to deal with inventory:
This is also a valuable experience we learnt from playing the game. One of
our group motto is we are willing the sacrifice inventory (that means we are willing to
hold lots of inventory) rather than losing market shares. This means that when setting
the production for the next period we were willing to produce a little bit more than the
forecasted demand of the market to make sure that we would be able to capture all the
potential growth of the market, rather than playing it safe. Fortunately for us in the
first periods our prediction of market demand was rather correct, thus we were able to
keep our inventory low.
However later in the game, particularly after period 5 we were usually
overoptimistic about our sales, which resulted in a huge inventory. There were many
options to solve that issue. The most obvious option would be to sell the entire
inventory. However this would be the last thing that we would like to do, as it would
mean a definite lost for us.
Another option, which was what we usually did, was to keep inventory to
sell in later periods. The first step in this process was to correctly forecast the sales in
the next period (which was what we did wrong). Then we calculated the next period
production by using the formula: production= sales-inventory. That way the inventory
of the previous period would be sold in the next period, and no further cost would
occur.
However there was an opportunity cost for this method, as this would
reduce production for next period. As explained by Professor Patrick in the Markstrat
world economy of scale would cause cost of production to reduce, which would
greatly increase profit. Unfortunately this was what we failed to consider.
Lesson number 9: Knowing your strength and weaknesses, focusing on what
most profitable
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VNU – International University
School of Business Administration
BA140IU
Business Game
Throughout this game although our group knew what produce was the
most profitable/potential for us, we failed to take that into our consideration.
Therefore, instead of focusing on those products we tended to distribute our budget
equally among our products, which was sometimes a rather waste of resources.
Lesson number 10: There was no most favored group at the start of the game
There is no most favored group at the start of the game. What decides the
winner of this game is not market share, but stock price index, and at the start of the
game stock price index of all groups were equal. It does not matter how much market
share a company has at the beginning, but rather how much more market share they
will capture during the game.
There are many factors that affect the end result of the game, all of them
translating into a group’s ability in playing the game:
-
A successful group must have good teamwork, with every member being really serious
about playing the game
-
A successful group must fully understand the game from the start, including how to read
the reports, how to make decisions in the game
-
A successful group must understand the basic concepts of marketing/finance/accounting,
etc.
-
A successful group must learn from their mistakes and learn from other groups
-
A successful group must always pay attention to other groups’ action and react
accordingly
-
A successful group must be willing to take the risk
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VNU – International University
School of Business Administration
BA140IU
Business Game
The end
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