1. 1 BOSTON LONDON PARIS S TRAT X Licensing Division S TRAT X Licensing Division The Markstrat Challenge I

2. 2 BOSTON LONDON PARIS Markstrat is a simulation designed to focus on strategic marketing issues  Understanding customer needs  Long-term perspective  Marketing as profit center  Competitive environment  Marketing strategy is based on segmentation, positioning, and resource allocation... marketing mix decisions are secondary

3. 3 BOSTON LONDON PARIS Getting started Managing your firm The Markstrat World

4. 4 BOSTON LONDON PARIS The "Markstrat World:” a large territory with a highly developed economy The Markstrat World:  Population: 250 million  Currency: Markstrat Dollar ($)

5. 5 BOSTON LONDON PARIS The basic scenario begins with firms starting in different positions

6. 6 BOSTON LONDON PARIS Each firm can compete in TWO product markets  Maximum: 5 brands/firm marketed at a time  independent  not substitutes  not complements V ODITES S ONITES

7. 7 BOSTON LONDON PARIS Power Base Cost Max. Frequency Design Volume Weight The Sonite market is already developed, each product having 6 determining product characteristics 10 - 20 $ 3 - 1020 - 100 5 - 505 - 100min. 10 Kg kHz Index W dm 3

8. 8 BOSTON LONDON PARIS Base Cost Weight Design Diameter Max. Frequency Autonomy Vodites will likely also have 6 main physical characteristics, but the market is as yet untapped $ 5 -1005 -2010 -100 3 -1010 -100min. 10 m kHz mm Index Kg

9. 9 BOSTON LONDON PARIS It is easy to recognize the origin of the brands from their names Product Type: S=Sonite V=Vodite Company marketing the brand: A, E, I,... Freely chosen letters or numbers SIBI

10. 10 BOSTON LONDON PARIS Sonite customers have traditionally been classified into 5 segments... High Earners Singles Buffs Others Professionals Si Pr Hi Bu Ot

11. 11 BOSTON LONDON PARIS...whereas initial studies for Vodites have pointed to a different segmentation scheme time sales Followers Early adopters Innovators Typical segment size evolution over time

12. 12 BOSTON LONDON PARIS Sonite & Vodite customers have the choice of purchasing through 3 distinct distribution channels Department Stores Department Stores Specialty Stores Specialty Stores Mass Merchandisers Mass Merchandisers

13. 13 BOSTON LONDON PARIS Summary of Markstrat World environment: Market growth Technology Economic environment

14. 14 BOSTON LONDON PARIS Getting started The Markstrat World Managing your firm

15. 15 BOSTON LONDON PARIS Your objective in managing your company is to maximize your Share Price Index  To do that, you will have to optimize: – Market share – Sales growth – Net contribution – Cumulative net contribution – R&D investments... ... but the main objective is to LEARN !

16. 16 BOSTON LONDON PARIS You will need to do a certain amount of analysis, before setting a strategic direction for your firm Data Information Strategic Options Strategic Options N S EW

17. 17 BOSTON LONDON PARIS Market research studies provide market data... it is up to you to prioritize, digest and interpret them  Consumer survey  Consumer panel  Distribution panel  Semantic scales  Multi-dimensional scaling (MDS)

18. 18 BOSTON LONDON PARIS  Industry benchmarking  Market forecast  Competitive advertising  Competitive sales force Market research studies provide market data... it is up to you to prioritize, digest and interpret them (cont'd)

19. 19 BOSTON LONDON PARIS  Advertising experiment  Sales force experiment  Conjoint Analysis Market research studies provide market data... it is up to you to prioritize, digest and interpret them (cont'd)

20. 20 BOSTON LONDON PARIS Once your strategy is clear, you should proceed to make a number of tactical decisions each year  Production Planning  Inventory disposal  Pricing  Mass communication  Sales force & Distribution  Market Research

21. 21 BOSTON LONDON PARIS Market Demand Production Inventory build-up Lost sales Number of Units QP (1-20%) QP Requested production level (assuming zero inventory level) QP (1+20%) Your production department will automatically adjust production levels up to 20% (+ or -) against your plan.

22. 22 BOSTON LONDON PARIS ? competitors “order-book” lost to industry Comparison of purchase intent with market share can give you a feel for the size of "lost sales." Market Share Market Share Purchase Intent Purchase Intent Lost Sales Lost Sales - 

23. 23 BOSTON LONDON PARIS Pricing in Markstrat is fixed once a year Average Retail Price Distrib. Margin Average Selling Price Specialty Stores Department Stores $ 100 $ 40$ 30 $ 60$ 70 Mass Merchandisers $ 90 $ 27 $ 63 Recommended Retail Price = $100

24. 24 BOSTON LONDON PARIS Each firm receives a marketing budget for the coming period, based on the previous period’s performance Budget Operating cost Hiring & training cost Firing cost Sales force Advertising expenditures Advertising Research expenditures Advertising Research expenditures Advertising for each brand for each brand R & D Development budget for each project for each project Market Research Sonite and Vodite study costs

25. 25 BOSTON LONDON PARIS Brand results CONTRIBUTION BY BRAND

26. 26 BOSTON LONDON PARIS Company Performance

27. 27 BOSTON LONDON PARIS The simulation starts at the end of the initial period, the new management (you!) making decisions for the next period MSPH MS3 Pn START MS3 Pn+1...

28. 28 BOSTON LONDON PARIS The decisions for the first period are limited in scope, so that your team can familiarize itself with Markstrat  Gather information  Do not make any major changes in your firm's operation  Do not introduce new brands, modify or withdraw existing ones  Do not start R&D projects  Do not give perceptual objectives for advertising

29. 29 BOSTON LONDON PARIS Organize yourselves and manage the group process Time pressure Conflicting opinions Information overload

30. 30 BOSTON LONDON PARIS The Markstrat World Managing your firm Getting started

31. 31 BOSTON LONDON PARIS When you return to your team room, the Main Menu will be on your PC screen Module Bar Click here to switch to the decision mode

32. 32 BOSTON LONDON PARIS After accessing the Decision Module Main Window, you will start making decisions for the coming period Click here to access the Production, Price and Advertising module

33. 33 BOSTON LONDON PARIS Decisions on production, price and advertising should be entered for each brand You are making decisions for brand SEMI Switch from one brand to another Switch from Sonites to Vodites

34. 34 BOSTON LONDON PARIS The sales force is organized by channel type to better meet the specific needs of the channels click here to normalize sales force effort to 100% in each channel

35. 35 BOSTON LONDON PARIS Buying market research studies will help you make sound decisions Your selections update the cost of selection automatically

36. 36 BOSTON LONDON PARIS You can monitor the status of your decisions at any time

37. 37 BOSTON LONDON PARIS Don't forget to transfer your decisions... Step 1 Click here to access the Interface Module Step 2 Transfer your decisions and hand your data disk over to the Administrator

38. 38 BOSTON LONDON PARIS Good luck! On your marks, get set, GO!  Give a name to your company  Respect the deadlines