Presentation is loading. Please wait.

Presentation is loading. Please wait.

Copyright 2002 by Ernest R. Cadotte Integrated Business Management.

Similar presentations


Presentation on theme: "Copyright 2002 by Ernest R. Cadotte Integrated Business Management."— Presentation transcript:

1

2 Copyright 2002 by Ernest R. Cadotte Integrated Business Management

3 Copyright 2002 by Ernest R. Cadotte Learning Strategy Business war games are a form of combative training where participants pit their business skills against those of formidable opponents under the watchful eye of a training coach.

4 Copyright 2002 by Ernest R. Cadotte Learning Strategy I listen, I forget. I see, I remember. I do, I understand. Old Chinese Proverb

5 Copyright 2002 by Ernest R. Cadotte Learning Strategy: Learn by Doing Participants learn about all aspects of business by managing a simulated business. The Marketplace scenario follows the life cycle of a new product. Business decisions are introduced as they become relevant in the evolution of the product.

6 Copyright 2002 by Ernest R. Cadotte Key Benefits Develop teamwork across functions & locations. Promote better decision making by helping participants see how their decisions can affect the performance of others & the organization as a whole. Facilitate learning of important business concepts, principles and ways of thinking.

7 Copyright 2002 by Ernest R. Cadotte Key Benefits Develop strategic planning and execution skills within a rapidly changing environment. Instill a bottom line focus and the simultaneous need to deliver customer value. Crystallize the financial implications of business decisions by linking them to cash flows and bottom-line performance.

8 Copyright 2002 by Ernest R. Cadotte Key Benefits Discover how important it is to use market data and competitive signals to adjust the strategic plan and more tightly focus business tactics. Build confidence through knowledge and experience.

9 Copyright 2002 by Ernest R. Cadotte How is the business war game conducted? Teams are placed in a war game scenario - starting up and running a new business venture. The opposition is played out by competing teams.

10 Copyright 2002 by Ernest R. Cadotte Business Team Market Opponent Objective is to profitably capture a dominant market position

11 Copyright 2002 by Ernest R. Cadotte Business Teams Each team member assumes a tactical area of responsibility. Marketing Finance Research Production Overall Leadership

12 Copyright 2002 by Ernest R. Cadotte How conducted? Business team receives information on current situation. Current situation is evaluated, strategy formulated and tactics set in placed. Tactical decisions are fed into the marketplace simulator, along with decisions of opponents. Results of decisions are fed back to business team.

13 Copyright 2002 by Ernest R. Cadotte How conducted? The business team can acquire information on what is happening in the marketplace: –customer reaction to market decisions –competitor actions Current situation is evaluated, strategy formulated, and tactics set in place. Tactical decisions are again fed into the marketplace simulator.

14 Copyright 2002 by Ernest R. Cadotte Game Scenario You and your business partners have decided to enter the international microcomputer industry. The microcomputer industry is in its introductory stage of the product life cycle. Several other international firms are entering the market at the same time.

15 Copyright 2002 by Ernest R. Cadotte Game Scenario Your business strategy will be tightly focused on direct sales to business customers. –You will not sell to the home market or through retail stores. –You will sell through company-owned sales offices in major metropolitan markets around the world.

16 Copyright 2002 by Ernest R. Cadotte Game Scenario The market is Europe, United States, Canada, Brazil and China. Needs and wants vary by country/region

17 Copyright 2002 by Ernest R. Cadotte The Marketplace simulation is available via the Internet at: marketplace6.com

18 Copyright 2002 by Ernest R. Cadotte The Task List leads you through each step of the game, and helps to illustrate the logic of the marketing process.

19 Copyright 2002 by Ernest R. Cadotte Be sure to read the directions on how to use the Marketplace software.

20 Copyright 2002 by Ernest R. Cadotte Game Scenario The market is the Europe, United States, Canada, Brazil and China. Needs and wants vary by country/region.

21 Copyright 2002 by Ernest R. Cadotte Sales Offices Paris Berlin Rome London Beijing Shanghai Guangzho Tianjin Curitiba Rio de Janeiro Sao Paulo Belo Horizonte Montreal Toronto Calgary Vancouver New York Atlanta Chicago Los Angeles

22 Copyright 2002 by Ernest R. Cadotte Market Segments (Market Structure) Price Performance Cost Cutter Work Horse Traveler Innovator Mercedes

23 Copyright 2002 by Ernest R. Cadotte Chronology of Events Q1: Organize the team, name the company and contract for a survey of potential customers. Q2: Analyze market information, establish strategic direction and set up shop (build plant, design brands and set up sales offices).

24 Copyright 2002 by Ernest R. Cadotte Chronology of Events Q3: Test-market brands, prices, ad copy, media campaigns, sales staffing. Determine production schedule for each brand. Q4: Study end user feedback, competition, and financial performance and make adjustments in strategy.

25 Copyright 2002 by Ernest R. Cadotte Chronology of Events Q5: Prepare a two-year business plan. Present business plan and financial request to venture capitalists and negotiate equity investment. Q5 – Q12: Initiate international roll-out campaign.

26 Copyright 2002 by Ernest R. Cadotte Chronology of Events End of game, prepare report to the Board regarding –second year performance –deviations from plan –justification for departures –analysis of current market –plan for future

27 Copyright 2002 by Ernest R. Cadotte Equity Financing (Q1-Q4) The initial capitalization is 4,000,000, which is being invested by the executive team in 1,000,000 increments over the first 4 quarters. The executive team owns 100% of the company. Forty thousand shares of stock will be issued to the executive team in exchange for their 4,000,000. The initial stock value is 100 per share.

28 Copyright 2002 by Ernest R. Cadotte Equity Financing (Q5) At the end of the first year of business, the executive team will have the opportunity to request up to 5,000,000 from a venture capitalist. The venture capitalist will expect an outline of the strategic plan for the second year in business, including target markets, geographic expansion, R&D, plant expansion, quality improvements, etc.

29 Copyright 2002 by Ernest R. Cadotte Debt Financing (Q5 and beyond) The bank will extend a line of credit to the executive team equal to one and a half times the firm's equity position in the previous quarter. The bank is highly risk adverse and will call in your loan in part or whole if your debt capacity declines due to unusual or extended losses.

30 Copyright 2002 by Ernest R. Cadotte Debt Financing (Q5 and beyond) Other financial institutions will also buy long-term notes at 2 points over conventional bank loans. The acceptable debt capacity is two times the firm's equity position in the previous quarter. Long-term debt is for 5 years with little possibility of the financial institution calling in the note due to short-term swings in income.

31 Copyright 2002 by Ernest R. Cadotte Special Financing Needs The bank is intolerant of poor financial management. If a firm ends a quarter with a negative cash position, the bank will contact a loan shark by the name of Guido to obtain an emergency loan to cover the firm's checking account.

32 Copyright 2002 by Ernest R. Cadotte Guidos Financing Terms Guido requires repayment in the next quarter. The emergency loan interest rate is a sliding scale which begins at 10% per quarter and may go as high as 25% per quarter. For each 100 which Guido places in your checking account, he will take one share of stock in your firm. The issuing of stock to Guido causes a dilution of your stock value and your share of the company.

33 Copyright 2002 by Ernest R. Cadotte Bankruptcy A firm is technically bankrupt if its cumulative losses exceed its equity investment. Bankruptcy occurs when the sum of the retained earnings and the common and preferred stock is a negative number. Stated differently, the management has used up all of the equity of the firm when the negative value of the retained earnings exceeds the value of the common and preferred stock.

34 Copyright 2002 by Ernest R. Cadotte Performance Evaluation Business Plan Report to Board Strategic thinking and tactical execution Balanced Scorecard- cumulative score for the last 4 quarters of play How well the company is prepared for the future

35 Copyright 2002 by Ernest R. Cadotte Q1: Organize the Business Name the company Assign organizational responsibilities Share personal learning goals Establish team norms Purchase survey of end users Sell stock to executive team

36 Copyright 2002 by Ernest R. Cadotte Learning Points for Quarter 1 Managing the team Organizing the work Deciding what one wants from the learning experience

37 Copyright 2002 by Ernest R. Cadotte Market conditions Marketing strategy Marketing tactics Market assessment Market objectives Market performance Manufacturing conditions Manufacturing strategy Manufacturing tactics Manufacturing assessment Manufacturing objectives Manufacturing performance Human resource conditions Human resource strategy Human resource tactics Human resource assessment Human resource objectives Human resource performance Financial conditions Financial strategy Financial tactics Financial assessment Financial objectives Financial performance Environmental analysis Business Strategy Feedback Mental Discipline of Marketplace Business Performance Assessment of Business Conditions BUSINESS LEVEL FUNCTIONAL LEVEL Strategy

38 Copyright 2002 by Ernest R. Cadotte Quarter 2 Setting Up Shop Establishing the firms strategic direction with a focus on brand design considerations.

39 Copyright 2002 by Ernest R. Cadotte Q2: Establish Strategic Direction Analyze market information Establish strategic direction –select target segments –decide on competitive posture Set up shop –design brands for target market segments –develop distribution strategy locate and build plant open initial sales offices for test market

40 Copyright 2002 by Ernest R. Cadotte Customers Buy Benefits, Not Features

41 Copyright 2002 by Ernest R. Cadotte Once you select a segment, you must design a brand to meet the needs of that segment. What features would make a computer more attractive to the Traveler segment?

42 Copyright 2002 by Ernest R. Cadotte How far do you go in giving the customers what they say they want? Is more speed, software applications, memory, keys on the keyboard, etc. always valued? Could more of some feature even make a customer unhappy?

43 Copyright 2002 by Ernest R. Cadotte What is the elasticity of the peanut? Searching for the Markets Response Function

44 Copyright 2002 by Ernest R. Cadotte Suppose you could design the ideal candy bar. How many peanuts would you put in the candy bar to make you the happiest? None A few? A bunch? A whole lot?

45 Copyright 2002 by Ernest R. Cadotte Which Candy Bar has the Most Peanuts? Baby Ruth Snickers Payday Milky Way

46 Copyright 2002 by Ernest R. Cadotte Which Candy Bar Do You Like the Most? Baby Ruth Snickers Payday Milky Way

47 Copyright 2002 by Ernest R. Cadotte What does your response function look like for peanuts? Is more always better? Would your happiness increase with every new peanut we added to the candy bar? Is there a limit?

48 Copyright 2002 by Ernest R. Cadotte Influence of quantity of peanuts on candy bar enjoyment Number of Peanuts None few many whole bunch Delicious Disgusting Enjoyment

49 Copyright 2002 by Ernest R. Cadotte What would be your response function for the following? Chocolate Caramel Nougat Coconut Rice Peanut butter

50 Copyright 2002 by Ernest R. Cadotte Here are a number of response functions. Which one applies to peanuts, chocolate, coconut, etc? Hot Cold LessMore More is good to a point and then ceases to add excitement Hot Cold LessMore More is always better

51 Copyright 2002 by Ernest R. Cadotte Hot Cold LessMore A little is just right, more only takes away value Hot Cold LessMore More adds value to a point & then takes away value Response Functions

52 Copyright 2002 by Ernest R. Cadotte Response Functions Little interest until threshold is crossed Hot Cold LessMore Any amount is bad Hot Cold LessMore

53 Copyright 2002 by Ernest R. Cadotte Response Functions No reaction. Indifference to having the feature Hot Cold LessMore

54 Copyright 2002 by Ernest R. Cadotte Take Any PC Segment, How Excited Will It Become if You Provide…. More memory? More speed? More functions on the key board? More software? More.….? Just like the candy bar ingredients, you must discover the response function for each PC component.

55 Copyright 2002 by Ernest R. Cadotte Select components that yield benefits for Travel PC segment Rugged Micro- High Wireless 6-hour Low-profile, Compact Trackball Wrist rest casementcircuitry resolution modembatterybuilt-in disk, keyboard mouse on keyboard flat LCD CD drives display Portability Use on road Connect to office Easy to use

56 Copyright 2002 by Ernest R. Cadotte Learning Points for Quarter 2 Market opportunity analysis Segmentation and target marketing Strategic and tactical planning Financial management

57 Copyright 2002 by Ernest R. Cadotte Learning Points for Quarter 2 Game theory - competitive positioning Brand design –linking product features to customer benefits –finding the customers response functions Marketing & manufacturing tradeoff - satisfy the customer or run the most efficient factory, the issue of changeover Financial liquidity - cash versus assets Logistics of plant location - production versus shipping economies

58 Copyright 2002 by Ernest R. Cadotte Quarter 3 Go To Test Market

59 Copyright 2002 by Ernest R. Cadotte Q3: Go to Test Market The Goal is to Maximize Learning and Not Profits

60 Copyright 2002 by Ernest R. Cadotte Q3: Go to Test Market Set selling prices Develop advertising campaign –design 2 ads, one for each brand –determine number of placements per ad Develop distribution strategy –hire sales force for quarter –open new sales offices for Q4

61 Copyright 2002 by Ernest R. Cadotte Q3: Test Market Schedule production –set minimums and maximums for warehouse –forecast demand –run factory simulation, check numbers Contract for market research on customers and competition Check pro forma financial statements - All

62 Copyright 2002 by Ernest R. Cadotte You are a market maker, not a market taker The market is not waiting for you to take their orders. You must create the market –Sell brands that customers want and at a price they are willing to pay –Locate sales offices where the largest number of customers can be found –Inform and persuade customers to buy a PC through advertising –Hire sales people to go out and find customers and persuade them to buy your PC

63 Copyright 2002 by Ernest R. Cadotte How to Set Price? Costs (production, marketing, overhead) Profit goals What the market will bear Competition

64 Copyright 2002 by Ernest R. Cadotte In the beginning, you will not be able to price above your costs There are many startup costs which will exceed your revenues. Your production volumes will be very low, resulting in high per unit costs.

65 Copyright 2002 by Ernest R. Cadotte No early profits Money 0 Time Costs to setup & grow the business +

66 Copyright 2002 by Ernest R. Cadotte Revenues will fall below costs at the outset of a new business Revenue Money 0 Time Costs to setup & grow the business +

67 Copyright 2002 by Ernest R. Cadotte Profits will come later Profits come latter.You are here. Profit Profits 0 Time Costs to setup & grow the business Revenue + -

68 Copyright 2002 by Ernest R. Cadotte Your goal is to speed up the adoption rate Demand Time Introduction Growth Maturity Decline You are here (High costs-low demand)

69 Copyright 2002 by Ernest R. Cadotte What Will the Market Bear? You must discover the market response function regarding price.

70 Copyright 2002 by Ernest R. Cadotte What is the markets price response function? Your Demand Your Price Elastic (demand drops fast with increasing prices) Inelastic (price is not a big factor)

71 Copyright 2002 by Ernest R. Cadotte Maybe it looks like this? Your Demand Your Price Demand drops slowly with small price increases and then drops dramatically with larger price increases

72 Copyright 2002 by Ernest R. Cadotte How will the market respond to competitor prices? Your Demand Competitors Price Low competitor prices will kill your demand

73 Copyright 2002 by Ernest R. Cadotte How to Create Ads? Order of priority tells the ad agency what to stress in the ad and implies importance of message to customer. Low price Easy to use More productive Fast Office applications Picture office workers Your Ad Most Important Least Important

74 Copyright 2002 by Ernest R. Cadotte How much to say in an ad? (Number of benefits?) Which response function is at work? More is good to a point and then ceases to add excitement Hot Cold LessMore Hot Cold LessMore More adds value to a point & then takes away value

75 Copyright 2002 by Ernest R. Cadotte How often do you advertise? Your Demand Number of Ads Diminishing returns Too little

76 Copyright 2002 by Ernest R. Cadotte But it also depends on what your competitors do. Your Demand Competitors Advertising Strong competitor advertising will steal away your customers

77 Copyright 2002 by Ernest R. Cadotte How many sales people? Your Demand Number of Sales People Too many Diminishing returns Too few

78 Copyright 2002 by Ernest R. Cadotte The response function is dynamic! Shift the response function upwards with better brands, prices, advertising, web tactics, sales force placement and compensation Your Demand Number of Sales People

79 Copyright 2002 by Ernest R. Cadotte Learning Points for Quarter 3 Execution of a coherent strategy Management of cash in the face of great uncertainty Learning to walk before you run

80 Copyright 2002 by Ernest R. Cadotte Learning Points for Quarter 3 Marketing strategy - coordinating a host of tactics Pricing - balancing costs, profit, what the market will bear, and competition Testing the market - discovering the markets many response functions Production - managing capacity, inventories, and costs in light of demand goals

81 Copyright 2002 by Ernest R. Cadotte


Download ppt "Copyright 2002 by Ernest R. Cadotte Integrated Business Management."

Similar presentations


Ads by Google