The Business Strategy Game Option

There’s an upgraded version of The Business Strategy Game to accompany this 11th edition. The new sixth-edition is the product of valuable feedback and suggestions from users, some new ideas on our part, and reworked programming—and represents an ongoing effort to continuously improve the simulation. This latest version incorporates a revised executive compensation option, the use of Eurodollars instead of German marks, modest enhancements in the Player’s Manual, and an assortment of programming refinements that makes it a welcome improvement over the version introduced in 1998.

What Sets This Simulation Apart
The Business Strategy Game has five features that make it an uncommonly effective teaching–learning aid for strategic management courses: (1) the product and the industry—producing and marketing athletic footwear is a business that students can readily identify with and understand; (2) the global industry environment—students gain up-close exposure to what global competition is like and the kinds of strategic issues that managers in global industries have to address; (3) the realistic quality of the simulation exercise—we’ve designed the simulation to be as faithful as possible to real-world markets, competitive conditions, and revenue-cost-profit relationships; (4) the wide degree of strategic freedom students have in managing their companies—we’ve gone to great lengths to make the game free of bias as concerns one strategy versus another; and (5) the five-year planning and decision-making capability it incorporates as an integral part of the exercise of running a company. These features, wrapped together as a package, provide an exciting and valuable bridge between concept and practice, the classroom and real-life management, and reading conventional wisdom about management and learning-by-doing. You’ll find opportunity after opportunity to use examples and happenings in The Business Strategy Game to connect to your lectures on the text chapters.

The Value a Simulation Adds
Our own experiences with simulation games, along with hours of discussions with users, have convinced us that simulation games are the single best exercise available for helping students understand how the functional pieces of a business fit together and giving them an integrated, capstone experience. First and foremost, the exercise of running a simulated company over a number of decision periods helps develop students’ business judgment. Simulation games provide a live case situation where events unfold and circumstances change as the game progresses. Their special hook is an ability to get students personally involved in the subject matter. The Business Strategy Game is very typical in this respect. In plotting their competitive strategies each decision period, students learn about risk-taking. They have to respond to changing market conditions, react to the moves of competitors, and choose among alternative courses of action. They get valuable practice in reading the signs of industry change, spotting market opportunities, evaluating threats to their company’s competitive position, weighting the trade-offs between profits now and profits later, and assessing the long-term consequences of short-term decisions. They chart a long-term direction, set strategic and financial objectives, and try out different strategies in pursuit of competitive advantage. They become active strategic thinkers, planners, analysts, and decision-makers. And by having to live with the decisions they make, they experience what it means to be accountable for decisions and responsible for achieving satisfactory results. All this serves to drill students in responsible decision-making and improve their business acumen and managerial judgment.

Second, students learn an enormous amount from working with the numbers, exploring options, and trying to unite production, marketing, finance, and human resource decisions into a coherent strategy. They begin to see ways to apply knowledge from prior courses and figure out what really makes a business tick. The effect is to help students integrate a lot of material, look at decisions from the standpoint of the company as a whole, and see the importance of thinking strategically about a company’s competitive position and future prospects. Since a simulation game is, by its very nature, a hands-on exercise, the lessons learned are forcefully planted in students’ minds—the impact is far more lasting than what is remembered from lectures. Third, students’ entrepreneurial instincts blossom as they get caught up in the competitive spirit of the game. The resulting entertainment value helps maintain an unusually high level of student motivation and emotional involvement in the course throughout the term.

About the Simulation
We designed The Business Strategy Game around athletic footwear because producing and marketing athletic footwear is a business students can readily understand and because the athletic footwear market displays the characteristics of many globally competitive industries—fast growth followed by market maturity, worldwide use of the product, competition among companies from several continents, production located in low-wage locations, and a marketplace where a variety of competitive approaches and business strategies can coexist. The simulation allows companies to manufacture and sell their brands in North America, Europe, and Asia; plus there’s the option to compete for supplying private-label footwear to North American chain retailers. Competition is head-to-head—each team of students must match their strategic wits against the other company teams. Companies can focus their branded marketing efforts on one geographic market or two or all three or they can deemphasize branded sales and specialize in private-label production (an attractive strategy for low-cost producers). They can establish a one-country production base or they can manufacture in all three of the geographic markets. Low-cost leadership, differentiation strategies, best-cost producer strategies, and focus strategies are all visible competitive options. Companies can position their products in the low end of the market, the high end, or stick close to the middle on price, quality, and service; they can have a wide or narrow product line, small or big dealer networks, extensive or limited advertising. Company market shares are based on how each company’s competitive effort stacks up against the efforts of rivals. Demand conditions, tariffs, and wage rates vary from geographic area to geographic area. Raw materials used in footwear production are purchased in a worldwide commodity market at prices that move up or down in response to supply–demand conditions. If a company’s sales volume is unexpectedly low, management has the option to liquidate excess inventories at deep discount prices.

The company that students manage has plants to operate, a workforce to compensate, distribution expenses and inventories to control, capital expenditure decisions to make, marketing and sales campaigns to wage, sales forecasts to consider, and ups and downs in exchange rates, interest rates, and the stock market to take into account. Students must weave functional decisions in production, distribution, marketing, finance, and human resources into a cohesive action plan. They have to react to changing market and competitive conditions, initiate moves to try to build competitive advantage, and decide how to defend against aggressive actions by competitors. And they must endeavor to maximize shareholder wealth via increased dividend payments and stock price appreciation. Each team of students is challenged to use their entrepreneurial and strategic skills to become the next Nike or Reebok and ride the wave of growth to the top of the worldwide athletic footwear industry. The whole exercise is representative of a real-world competitive market where companies try to outcompete and outperform rivals—things are every bit as realistic and true to actual business practice as we could make them.

There are built-in planning and analysis features that allow students to (1) craft a five-year strategic plan, (2) gauge the long-range financial impact of current decisions, (3) do the number-crunching to make informed short-run versus long-run trade-offs, (4) assess the revenue-cost-profit consequences to alternative strategic actions, and (5) build different strategy scenarios. Calculations at the bottom of each decision screen provide instantly updated projections of sales revenues, profits, return on equity, cash flow, and other key outcomes as each decision entry is made. The sensitivity of financial and operating outcomes to different decision entries is easily observed on the screen and on detailed printouts of projections. With the speed of today’s personal computers, the relevant number-crunching is done in a split second. The game is designed throughout to lead students toward making decisions based on "My analysis shows . . ." and away from the quicksand of making decisions based on "I think," "It sounds good," "Maybe, it will work out," and other such seat-of-the pants approaches.

The Business Strategy Game is programmed to work on any PC capable of running Windows 3.1x, Windows 95/98, or Windows NT, and it is suitable for both senior-level and MBA courses. The game accommodates a wide variety of computer setups (as concerns microprocessors, monitors, and printers) and runs quite nicely on a network.

Features of the New Version
This latest version is evolutionary, not revolutionary—the changes are minor compared to transformations undertaken in prior editions. We’ve shifted from the use of German marks to Eurodollars to reflect the monetary changes under way throughout much of Europe, and we’ve substantially improved the stock bonus element of the executive compensation option. In addition, we’ve instituted an assortment of behind-the-scenes programming changes to eliminate various bugs and quirks. As you would expect, we have retained the array of new features and improvements introduced in the two previous versions: the demand forecasting feature, the inventory liquidation option, the celebrity endorsements feature, the optional executive compensation feature, the extensive on-screen decision support calculations and what-iffing capability, the much-improved five-year strategic plan format, and the added scoring flexibility.

As before, instructors have numerous ways to heighten competition and keep things lively as the game progresses. There are options to raise or lower interest rates, alter certain costs up or down, and issue special news flashes announcing new tariff levels, materials cost changes, shipping difficulties, or other new considerations to stir the pot a bit and keep business conditions dynamic. And the built-in scoreboard of company performance keeps students constantly informed about where the company stands and how well they are doing. Rapid advances in PC technology continue to cut processing times—it should take no more than 45 minutes for you or a student assistant to process the results on an older PC and well under 30 minutes on a PC with a Pentium 166 or faster chip.

A separate Instructor’s Manual for The Business Strategy Game describes how to integrate the simulation exercise into your course, provides pointers on how to administer the game, and contains step-by-step processing instructions. Should you encounter technical difficulties or have questions, the New Media department at Irwin/ McGraw-Hill can provide quick assistance via a toll-free number (1-800-331-5094). There’s also a special publisher’s Web site for the game at www.mhhe.com/bsg where you can obtain the latest information and software upgrades.