1. STRATX Licensing Division
The Markstrat Challenge I
STRATX Licensing Division

2. Understanding customer needs Long-term perspective
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
The Learning Process and the Markstrat Simulation
Welcome to the Markstrat simulation.
The Markstrat simulation has proven its effectiveness as a learning tool. This is in particular due to the following reasons:
Extensive treatment of market competition - Most simulations concentrate on the internal accounting-finance-manufacturing aspects of a firm and have a very simplistic representation of market competition. This is indeed the most difficult component to model, but also the most important one.
Strategic perspective - In the Markstrat simulation, learning of strategic concepts prevails over 'gaming' behaviour. It becomes clear that tactical decisions such as pricing, distribution, selling or communications cannot be effective without first defining explicit portfolio, market segmentation, and brand positioning strategies. This is reinforced by the long term perspective provided by the simulation as it usually runs over periods of six to twelve simulated years.
Solid theoretical foundations - The Markstrat model incorporates theories of market and competitive behaviour which have been tested empirically in a variety of situations.

3. Getting started Managing your firm The Markstrat World
You have been recruited as Marketing vice-president for a division of a large diversified firm. You come with your own team from a different industry and have no experience of the Markstrat world.
You will be facing several other firms in a highly competitive environment. Marketing strategy is your main area of responsibility, but you will also be concerned with financial matters, production planning, and R&D. You will have to integrate these various dimensions of business strategy into a long-term perspective in order to gain an edge on competition.

4. Currency: Markstrat Dollar ($)
The "Markstrat World:” a large territory with a highly developed economy
The Markstrat World:
Population: 250 million
Currency: Markstrat Dollar ($)
An overview of the Markstrat World
The Markstrat simulation does not claim to accurately represent a particular industry or market. It relates to an artificial community of approximately 250 million inhabitants whose monetary unit is the Markstrat Dollar, symbolized by $.
This Markstrat world behaves globally like most markets, and all general marketing principles accumulated either through experience or from marketing textbooks are relevant. However, Markstrat, like any specific country, market or industry, also has its own peculiarities.

5. The basic scenario begins with firms starting in different positions
The Industry
The Markstrat world consists of a handful of competing companies that manufacture and market consumer durable goods comparable to electronic entertainment products.
At the beginning, each firm markets two brands which can be modified or withdrawn from the market. Each firm can also introduce new brands as the simulation evolves. Each firm starts in different initial situation in terms of many criteria, including market share, customer awareness levels, distribution coverage and profitability.
The marketing stategy of each firm should consequently be adapted to its particular situation within the industry.
In spite of these differences in the characteristics, no firm has a systematic advantage over the others. Each company has an equal opportunity to develop an appropriate strategy, which, although different for each competitor, will lead to successful performance.

6. Each firm can compete in TWO product markets
independent
not substitutes
not complements
Products
Your company manufactures and markets consumer durable goods comparable to electronic entertainment products, known as Sonites. The Sonite market has grown quite consistently over the past 20 years. The products have increasingly appealed to a wider audience, and the market has recently achieved an even greater rate of growth. It is now a well structured market.
It is also widely accepted in the industry that a new market is likely to emerge for a second product type, the Vodite. The idea of the product comes from a basic technological breakthrough made in the space industry under government contracts. Your company and your competitors in Markstrat are the most likely suppliers of Vodites because of their technological and marketing expertise.
The Sonite and Vodite markets will be completely independent in terms of demand, technology and manufacturing. They are not complementary in any way and there will not be any substitution from one to the other.
Each firm currently distributes two Sonite brands. All initial brands, which are available at the start of the simulation, along with their characteristics will be listed in your first Newsletter.
SONITES
VODITES
Maximum: 5 brands/firm marketed at a time

7. $ Index Kg dm3 kHz W Weight Design Volume Max. Frequency Power
The Sonite market is already developed, each product having 6 determining product characteristics
Weight
Design
Volume
Index Kg
dm3
3 - 10
Max. Frequency
Power
Base Cost
Existing products: Sonites
The Sonite is the only product type currently marketed by your company. Sonite brands are differentiated mainly in terms of five physical characteristics as well as base cost. Only these principal characteristics will be considered in the course of the simulation. They are:
Characteristics Feasible range
1. Weight (Kg) 10-20
2. Design (index) 3-10
3. Volume (dm ³)
4. Maximum frequency (KHz) 5-50
5. Power (W) 5-100
6. Base cost ($) minimum (for a production batch of 100,000 units)
It is generally thought that the Markstrat firms will modify their brands and introduce new ones in the coming years in order to better meet the needs of the market segments. These changes will represent variations on the six main characteristics described above. Brand improvements and new brand introductions naturally depend upon the willingness and ability of the firms to launch and complete R&D projects.
In doing the R&D, the values of the physical characteristics should be specified in whole numbers of the relevant units, and within the feasible technical range for each dimension.
kHz W $
5 - 50
min. 10

8. $ m mm kHz Kg Index Autonomy Max. Frequency Diameter Design Weight
Vodites will likely also have 6 main physical characteristics, but the market is as yet untapped
Autonomy
Max. Frequency
Diameter m mm
kHz
5 -100
5 -20
Design
Weight
Base Cost
Products for the future: Vodites
Although the scientific bases are known and available, substantial R&D efforts are likely to be required for the development of a Vodite product. From preliminary information available, the main physical characteristics of a Vodite will be:
Characteristics Feasible range
1. Autonomy (m) 5-100
2. Maximum frequency (KHz) 5-20
3. Diameter (mm)
4. Design (index) 3-10
5. Weight (Kg)
6. Base cost ($) minimum (for a production batch of 100,000 units)
If developed, Vodites would satisfy a totally different need to that of Sonites, and there would be no interaction between the two types of products at the sales level.
There is little reliable information today about the potential size of the Vodite market. Experts tend to agree, however, that it could be quite attractive if the right products were made available at the right price.
Index Kg $
3 -10
min. 10

9. It is easy to recognize the origin of the brands from their names
Brand name conventions
Each brand name is made up of four characters.
The first letter being an 'S' for a Sonite, or a 'V' for a Vodite.
The second letter of the brand name identifies the company marketing the brand (A, E, I, ...).
The last two characters (letters or numbers) are freely chosen by each firm to generate different brand names.
For instance, brands SIBI and SIRO would be Sonites belonging to company I, and brand VAIN would be a Vodite marketed by company A.
All new brands should follow these conventions. All brands should have different names, but the selected name has no influence on the market response to the brand.
Product Type:
S=Sonite
V=Vodite
Company marketing the brand:
A, E, I, ...
Freely chosen letters or numbers

10. Sonite customers have traditionally been classified into 5 segments...
Singles
Professionals Si Pr
Buffs
High Earners
Market segments (Sonites)
The target markets in Markstrat are households and individuals over 18 years of age. The opinion of experts, confirmed by several studies undertaken by the firms, is that one can distinguish five segments in the Sonite market with different characteristics and significantly different purchasing behaviour:
Buffs (Bu) - People who are enthusiastic and very knowledgeable about the products. They are primarily concerned with quality and technical features.
Singles (Si) - People in this segment live alone. Although they are less technically competent than Buffs, they demand good performance from a product that they may use more than the average consumer.
Professionals (Pr) - Persons who have a higher level of education and high incomes. They tend to be more independent in their occupation and to engage in many social activities. Their purchase of the product is partially motivated by social status needs.
High earners (Hi) - People who have high incomes but do not possess the higher level of education or occupational independence of the individuals in the Professionals segment.
Others (Ot) - Consumers who do not belong to any of the above groups. This segment represents the largest proportion of the population. However, in the past it has known a significantly lower penetration of Sonite products than other segments.
The five segments are at different stages in their development as far as Sonite sales are concerned. Current segment sizes and growth trends will be communicated to you when you take up your new job.
Others Hi Bu Ot

11. Typical segment size evolution over time
...whereas initial studies for Vodites have pointed to a different segmentation scheme
Typical segment size evolution over time
sales
Followers
Market segments (Vodites)
While potential consumers for Vodites are the same individuals who buy Sonites, a different segmentation scheme is likely to be valid for Vodites. Analysts believe that it will be most effective to consider three segments for this new technology:
Innovators (In) - People in this segment tend to be adventurous, more cosmopolitan in their social relationships, and wealthier than those who adopt later. They are willing to try new ideas at some risk.
Early adopters (Ad) - They usually adopt new ideas early but carefully. They are among the most influential people in their communities. They represent a critical group in the adoption process. They tend to be opinion leaders and helpful in 'advertising' the new product to other potential buyers.
Followers (Fo) - These people represent the bulk of customers. They adopt an innovation only after a large number of people have tried it, and are thus often highly influenced by early adopters.
Early adopters
Innovators
time

12. Department Stores Specialty Mass Merchandisers
Sonite & Vodite customers have the choice of purchasing through 3 distinct distribution channels
Department
Stores
Specialty
Mass
Merchandisers
Distribution
All products may be distributed through three distribution channels, each of which is visited by the supplier's sales force.
Specialty stores - They make an important proportion of their sales from Sonite-type products and provide specialised services.
Department stores -These handle a wide variety of merchandise and may have a department carrying Sonites.
Mass Merchandisers - These carry Sonites only as one of the many product categories they distribute.
It is estimated that there are at the outset some 30,000 specialty stores, 7,000 department stores belonging to 15 different chains, and 10,000 mass merchandisers belonging to 8 different chains, all of which can potentially distribute the various Sonite and Vodite brands.
Differences between margins obtained by the stores in each of the three channels are mainly due to differences in the service level and the quantities purchased. These margins, expressed as a percentage of their retail price, are approximately constant across brands for a given channel type. Their values are:
40% for specialty stores
30% for department strores
30% for mass merchandisers.

13. Summary of Markstrat World environment:
Market growth
Technology
Market Growth
The overall Sonite market growth has seen relatively high growth over the last three years. However, the five segments are growing at different rates. Short-term and long-term forecasted growth rates will be available in the Market Research Studies.
Technology
R&D for new product development, existing product improvement, and for base cost reduction
Introduction of Vodites
No major innovations expected that would make Sonites or Vodites obsolete
Economic Environment
Information concerning the macro-economic environment (inflation rate, growth in GNP, etc.) will be available in the Newsletter and updated each period.
Economic environment

14. Getting started
The Markstrat
World
Managing
your firm

15. To do that, you will have to optimize:
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 !
Marketing
The Marketing department for which you and your team will be responsible is a profit centre responsible for the design and implementation of marketing strategy as well as for marketing operations.
In this privileged situation, the marketing department is responsible for the overall orientation of the company to its markets and it must interact with other departments of the firm.
The performance of the marketing department as a profit center is measured by the net contribution it generates, as well as its market share position and ability to grow and maintain brand equity.
At the end of the day, the best measure of your company's performance will be its Share Price Index.
Movements in your SPI will be affected by a number of factors, notably: your company's market share, sales growth, net contribution, cumulative net contribution and your investments in R&D.

16. Data Information Strategic Options
You will need to do a certain amount of analysis, before setting a strategic direction for your firm
Data
Information
Strategic
Options N S E W
Some pitfalls to avoid
Before making dramatic decisions, try to get a good feeling for the behavior of the market.
Do not jump to the first explanation, or conclusion, that you may have reached when faced with a problem: it may be incomplete.
Analysis of key information from market research studies, of your own situation and of past competitive behavior should help you reach more robust decisions.

17. Multi-dimensional scaling (MDS)
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)
You can buy up to 21 market research studies
All studies bought will be available on paper and on screen.
Consumer survey: administered to 3,000 individuals at the end of the simulated period. It gives:
brand awareness (unaided recall of the brand's name)
shopping habit data (for each channel: proportion of individuals who would choose this channel when shopping for a Sonite or a Vodite)
purchase intentions (proportion of individuals, among those familiar with the various brands, who would select a given brand as their first choice)
Consumer panel: Market shares, based on units sold, for each brand in the category in each segment. Also provides the total sales in units by segment.
Distribution panel: Market shares, based on units sold, for each brand in the category in each channel. Also provides the total sales in units by channel.
Semantic scales: Provides a map of brands based on a semantic differential questionnaire administered to a sample of 600 individuals. Respondents are asked to rate each characteristic of each brand on a scale from 1 to 7 according to the way they perceive the brand. The study also provides the 'ideal' point on each characteristic for each segment.
Multidimensional scaling of brands similarities and preferences: This study provides a joint space configuration obtained by non-metric multidimensional scaling. It relies on similarity and preference data on the complete set of brands available in the market. Further details on such a perceptual map and on its interpretation will be given in the second part of this presentation.

18. Industry benchmarking Market forecast Competitive advertising
Market research studies provide market data ... it is up to you to prioritize, digest and interpret them (cont'd)
Industry benchmarking
Market forecast
Competitive advertising
Competitive sales force
Industry benchmarking: Provides general information about each of the competitors obtained from annual reports. This includes income statement data on revenues and expenses globally for the entire company.
Market forecast: Provides an estimate of the expected size and growth of each segment for the next period as well as for five periods later. It relies on market extrapolation and assumes stable marketing action on the part of the competitors. Any change in the competitors' strategies and in market conditions would not be reflected in such a study. When no brand is available on the market this study will give a forecast of the potential market for the first period of introduction of a product, based on declared likelihood of purchase obtained from a sample of individuals. In this case, the market forecast obviously does not rely on history and tends to be less accurate and generally somewhat optimistic.
Competitive advertising estimates: Estimates of the total advertising expenditures for each competitive brand and their breakdown by segment.
Competitive sales force estimates: Estimates of the sales force sizes of each firm in the industry and their breakdown by brand by channel of distribution.

19. 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)
Advertising experiment
Sales force experiment
Conjoint Analysis
Advertising experiment: Experiment conducted by increasing the advertising budget in selected regional test markets. The experimental results are used to project the change in brand awareness, market share, and contribution after marketing for each of the company brands by segment, if the advertising budget had been increased for that brand by the indicated percentage (for example 20%) over actual expenditures, and if competitive actions had remained the same.
Sales force experiment: Experiment set up in regional test markets by increasing the number of salespersons per channel. The results are then used to estimate the change in number of distributors, market share by channel, and contribution after marketing for each brand, if the sales force directed to each channel had been increased as indicated (for example by 10 salespersons), and if competitive actions had remained unchanged.
Conjoint analysis (not always available): This study enables the firm to estimate the relative importance of each product feature and the value attached to each of them by the consumers.

20. Sales force & Distribution Market Research
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
Production Planning You set a planned production level for each brand, which is adhered to by manufacturing with a degree of flexibility (see page 21)
Inventory disposal You may decide to reduce your inventory by selling all or part to a trading company at a given percentage of the transfer cost (usually between 50 and 90%)
Pricing You set the recommended retail price for each marketed brand
Mass communication You determine expenditure for each brand on two dimensions: Quantity: purchase of media space & time Quality: advertising research for copy tests, media selection, and creative work performed by advertising agencies
Targeted segments: You specify which segments should be targeted by advertising. Target selection only affects the media vehicle selected to communicate the message, but does not impact the message itself.
Perceptual objectives: You determine the perceptual "message" that is to be conveyed (dimensions and objectives)
Sales Force You determine the number of salespeople and structure them by distribution channel
You instruct your sales force on how to allocate their efforts across the various brands that they carry
Market Research You can purchase any number from a range of different studies each year

21. Requested production level
Your production department will automatically adjust production levels up to 20% (+ or -) against your plan.
Market Demand
(assuming zero
inventory level)
Inventory
build-up
Lost
sales
Number of
Units
Production
The production department also operates as a profit centre. Each period, the Marketing department specifies a production plan for each product. The Production department then proceeds to manufacture the required quantities in the best possible conditions. The following rules guide the interface between the Marketing and the Production departments:
In a given period, the actual production level for each product is automatically adjusted in response to actual demand for that product, within plus or minus 20% of the production plan submitted by Marketing.
From one period to the next, Marketing is completely free to increase or decrease production plan of a given product, without any penalty. The production department is treated as a highly flexible external supplier, so Marketing is not concerned about manufacturing investments, fixed costs or capacity utilisation. The transfer cost for each product incorporates all costs associated with this high level of manufacturing flexibility, including depreciation and fixed costs.
Marketing pays the Production department only when goods are actually sold.
The transfer cost of a given product will evolve over time under two main forces:
inflation (which increases it)
experience effects and economies of scale (which reduce it)
Production QP
(1-20%) QP
(1+20%) QP
Requested production level

22. ? -  Purchase Intent Market Share Lost Sales competitors “order-book”
Comparison of purchase intent with market share can give you a feel for the size of "lost sales."
Purchase
Intent -
Market
Share 
Lost
Sales
competitors
Production
The transfer cost may be above the base cost specified in the successful R&D project (6th characteristic) in the case of a production level below 100,000 units. Indeed, until accumulated production reaches 100,000 units, fixed costs have to be allocated to fewer units.
Inventory: In cases of over-production leading to inventories, Marketing is charged inventory holding costs corresponding to warehousing and working capital expenses. The inventory is valued at transfer cost and holding costs are computed as a percentage of its value, according to the rate given each year in the Newsletter.
Lost sales: In case of under-production, there is no exact calculation of the level of lost sales. However, to get a good feel for the amount of lost sales, one can compare the purchase intentions (consumer survey) with the actual market share (consumer panel) for a given product. Sales can be lost to competition, in which case, consumers who had the intention to buy your brand and cannot find it will transfer their buying to a competitive brand. This competitive brand would then probably reach a higher market share than its initial purchase intentions. Sales can also be completely lost to the industry, in which case, the market does not develop as much as it could have, or alternatively, customers can decide to postpone their purchase decision until the following period.
“order-book” ?
lost to industry

23. 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
Pricing
Markstrat companies provide recommended retail prices for each of their brands. This is the list price for consumers.
Specialty and department stores respect recommended retail prices provided by Markstrat companies. Mass merchandisers typically sell all brands at a similar discount rate of 10% off the list price. Note that this implies that mass merchandisers' margins are typically lower than those of the other channels because the percentage margin applies to this discounted price.
The recommended retail price cannot be set so low that the company's Average Selling Price is under transfer cost (i.e. dumping is strictly forbidden).
In addition, price increases or decreases of greater than 30% in one period are highly discouraged as they often result in adverse market reactions. While consumers may react strongly in case of excessive price increases, distributors may react as strongly when their margins are about to be cut because of a significant decrease in the price of a brand. This applies whether or not the product marketed under that brand name is modified. A message would warn the team when such decisions are made. If the team ignores the warning, the recommended retail price is likely to be automatically adjusted to limit the negative effect of the adverse reaction.

24. Advertising expenditures Sonite and Vodite study costs
Each firm receives a marketing budget for the coming period, based on the previous period’s performance
Advertising expenditures
Advertising Research
expenditures
Advertising
for each
brand
Operating cost
Hiring & training cost
Firing cost
Sales force
Budget
R & D
Development budget
for each
project
Budget
The Marketing department of each firm is allocated a budget for the following period to cover advertising, sales force, research & development, and market research expenditures. You will have to work within this given budget!
The budget shows the funds available to spend in the next year. If total spending exceeds the allocated budget for a period, expenses will be automatically cut, starting with advertising expenditures.
The budget allocated to the Marketing department is linked to the success of the department: it is a straight 40% of the net contribution achieved in the previous period. Above a maximum level, however, resources are re-allocated to other businesses of the company under a different management organization. A minimum budget is always provided in case of insufficient performance.
Because of these resource allocation decision rules, a firm may be given a much larger budget than would really be needed to maximize the firm's performance. In such a situation, the firm should certainly not automatically spend its entire allocated budget.
Market Research
Sonite and Vodite study costs

25. Brand results CONTRIBUTION BY BRAND Brand Contribution calculation
Sonite Brands
Unit
Total
SEMI
SELF
SEXY
SEBU
SEOT
Base R&D project
PSMO3
PSL01
PSSI2
PSBU2
PSOT2
Sales
Units sold U
60 000
48 000
Average retail price $
358
399
442
279
357
204
Average selling price
233
264
282
181
222
140
Revenues K$
68 858
45 820
38 251
13 320
6 720
Production
Units produced
Current unit transfer cost -
114
116 96
202
109
Average unit transfer cost
117
120
Cost of goods sold
-5 232
Units in inventory
59 171
65 120
Inventory holding cost
-1 977
-539
-604
-834
Inventory disposal loss
-1 498
Contribution before marketing
82 693
38 584
25 790
17 129
1 200
-10
Marketing
Advertising expenditures
-9 506
-3 007
-1 995
-500
-997
Advertising research expenditures
-392
-93
-105
-49
-52
Sales force
-2 097
-385
-488
-386
-433
-405
Contribution after marketing
70 692
35 098
23 202
13 642
216
-1 466
Brand Contribution calculation
Average retail price = Average prices paid by consumers, depending on the channels used
Average selling price = Average retail price - distributors' margins. Depends on the split among the three different distribution channels, since retail prices and margins are different
Revenues = Number of units sold x Average selling price
Current unit transfer cost = Unit price charged by Production department to Marketing department for the production batch of current period (for units sold only)
Average unit transfer cost = Computed on the basis of first-in, first-out. Likely to be different from the current unit transfer cost when inventories were left at the end of the previous period
Cost of goods sold = Number of units sold x Average unit transfer cost
Inventory holding cost = Inventory value x Inventory holding cost per annum rate (% rate given each year in the Industry Newsletter)
Inventory disposal loss = Inventory sold to a trading company at a given % of transfer cost -> leads to a loss of (1 - the given %) of transfer cost per unit
Contribution before marketing = Revenues - (cost of goods sold + inventory holding cost + inventory disposal loss)
Contribution after marketing = CBM - (advertising + advertising research + sales force)

26. Company Performance Company results
The company scorecard is a general summary of the firm's overall performance with a comparison with the prior year's results.
Four overall measures of performance are reported: market share, retail sales, firm contribution and a stock price index.
The stock price index is based on multiple measures of the performance of the firm in its industry. The return on investment is the ratio of the net contribution with the expenditures (marketing, market research and R&D).
The company performance table consolidates all brands' contributions.
The firm's net contribution is the total Contribution after marketing - (market research studies + research and development + interest + exceptional cost or profit).

27. The simulation starts at the end of the initial period, the new management (you!) making decisions for the next period
MS3
Pn+1
...
START
Simulation process
At the beginning of the simulation, you will be given the current annual Company Report of your firm, as well as the Industry Newsletter and some Market Research Studies. You will then start analysing this information. Once the team has agreed on objectives and has set a strategy for the company, you will make decisions for the first simulated period of one year.
Your decisions will then be submitted, together with the decisions of your competitors, to the Markstrat3 software model which will generate the results of that period.
You will receive these results in the form of your next Company Report and Industry Newsletter. At the same time, you will also receive the Market Research Studies which you have ordered and which provide, at a given cost, more detailed information about the market and your competitors.
After analysing this new set of information, the team will check objectives and decide to follow or adapt the strategy. You will then make decisions for the next period and follow this cycle of decisions and results for between six and twelve simulated years.
MS3 Pn
MSPH

28. Do not make any major changes in your firm's operation
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
You and your team have been assigned one of the Markstrat firms and you will soon receive your Company Report and Industry Newsletter representing the situation of your company and the market you are active in, at the time you are taking over the firm's marketing management. You are able, from the company report information and the information in this document, to evaluate the relative market strength of your firm compared to your competition. Even though you might have a fair amount of information, there are still many uncertainties, which will decrease when you acquire more specific market research data and when you make the decisions and your competitors make their moves. Consequently, you should not take inconsiderate risks for your first decision.
For your first decision, you should concentrate on the management of your two existing brands. In the process of reaching your decisions for that first period, you should analyse the actions of your firm's previous management team. It is not wise at this stage to drastically change their advertising, pricing, sales force, and production policies since you probably cannot yet make a sound decision about the direction and the degree of the change. On the other hand, you may consider purchasing market research studies, which will be made available for your next set of decisions.

29. Organize yourselves and manage the group process
Information
overload
Time
pressure
During the first set of decisions, it is essential that you rapidly develop good working relationships in your group. It is important that each member of your group should be involved in the discussion of all issues and should develop a grasp of the total situation. Therefore, it is important to avoid the natural tendency for each member to concentrate in his or her area of expertise.
Later in the simulation - when everybody has a common understanding of the strategic issues and the management of the firm becomes more complex in terms of the number of brands, the R&D interface, the market developments, and the intensity of competition - some specific problem areas can be delegated to individuals. In this way, the group should learn to work efficiently, and each of its members should benefit equally from the Markstrat experience.
Conflicting
opinions

30. The Markstrat
World
Managing
your firm
Getting started

31. Click here to switch to the decision mode
When you return to your team room, the Main Menu will be on your PC screen
Click here to switch to the decision mode
Module Bar
Each period, you will receive print-outs of the following documents:
The Company Report: summary of the firm decisions, messages, results of the firm overall as well as by product category (Sonite and Vodite markets) for the period, results for each brand marketed by the firm, feedback from the R&D department, and cumulative results since the beginning of the simulation.
The Newsletter: contains general market information
The Market Research Studies: market research information bought from outside marketing service firms.
Each of these modules can be accessed in the software via the menu buttons found on the module bar of the main screen of the Markstrat3 software.
By clicking on the 'Decisions' button on the top left of the module bar, you will open the decision module.

32. Click here to access the Production, Price and Advertising module
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
The 'Decisions' module in the Markstrat3 software is composed of five main sections, each represented by a button in the 'Decisions' module window:
Brand Portfolio
Production, Price & Advertising
Sales force & Distribution
Market Research Studies
Research & Development
As decisions for Period 1 are limited in scope, the 'Brand Portfolio' and 'Research and Development' buttons have not been released at this stage and remain grey to indicate that you cannot access them.

33. You are making decisions for brand SEMI
Decisions on production, price and advertising should be entered for each brand
Switch from
Sonites to
Vodites
You are making decisions for brand SEMI
Production, Price and Advertising
The brands you have chosen to market next period are listed on the tabs at the bottom of the screen. The tab of the brand to be displayed should be clicked. Decisions on production, price, and communication can then be entered for that brand.
Production - Enter a production level based on your expectations of the sales in the coming period, taking into account the units left in inventory if any. The production department will adjust up to a limit of 20% (+ or -) to respond to the real demand. You can decide to sell all or part of your inventory to a trading company which will buy it at given percentage of its value (this percentage can be found in the Newsletter). This operation will generate a loss of (1 - the given percentage) of the value of the stock sold to the trading company.
Price - Enter the recommended retail price in Markstrat Dollars ($). It is the list price for the consumer. This corresponds to the price usually paid by consumers, except in the mass merchandiser channel (10% discount)
Advertising - Enter the advertising media budget and the advertising research budget in thousands of Markstrat Dollars (K$). Allocate your advertising budget to the various market segments. The entry on the 'targeted segments' line corresponds to the proportion of the budget targeted to each of the segments respectively. The percentages must add to 100%.
Perceptual Objectives - Do not set any perceptual objective for your communi- cation in this initial period as you do not have enough information yet to do so.
Switch from one brand to another

34. click here to normalize sales force effort to 100% in each channel
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
Sales force and Distribution
Your company's sales force is organised by channel of distribution.
Number of sales persons - Your primary decision will be to assign a number of sales people to each of the three distribution channels. Changes in the number of salespersons are expected to have an influence on the distribution coverage of your brands. Your sales force is knowledgeable about all your products, you can therefore modify the allocation of salespeople to specific distribution channels without any expenditure.
Percentage of efforts - Your secondary decision will be to instruct your sales people on how to allocate their efforts to the various brands that they sell. Indeed, some brands are targeted to segments which are more likely to make their purchase in certain channels of distribution.
The 'assistant' button generates automatic allocation options through a dialog box which provides help on the time allocation decision. Four assistant options are proposed. The first option 'equal allocation on all brands' allocates an equal amount of effort to each brand within a channel. The three following options are based on the previous period's results. In these cases, no effort will be allocated to new brands introduced during the current period. Obviously, you will need to enter some figures so that some effort is devoted to new brands. Using the 'normalize' button after you have entered new figures will automatically adjust your inputs to total 100% in each channel.

35. Buying market research studies will help you make sound decisions
Your selections update the cost of selection automatically
Market Research Studies
Market research studies may be requested simply by checking the boxes corresponding to each of the studies desired. The cost of these studies appears as the boxes are checked.
When you order a study, the study is performed during the simulated period and the results are made available at the end of the period, providing information for the next period's decisions.
Some of the studies may apply only if there are brands marketed during the period (e.g., the consumer panel for the Vodite market). It may be difficult to anticipate whether competition will launch new brands ahead of time. You can nevertheless order these studies in anticipation that the study will contain relevant information. If this is not the case, you will not be charged for this study.

36. You can monitor the status of your decisions at any time
Checking buttons
Budget - The Overall Budget Section presents expenditures by market. The allocation of advertising and sales force expenditure by brand can be found in the Brand Details Section. The R&D Details section lists the R&D projects requested for the next period with the corresponding budgets assigned to each of them. These three parts can be found as tabs at the bottom of the screen. At any time you can check your expenditures against your allocated budget. A warning message will appear when the budget is exceeded.
Summary - The 'Summary' button gives access to five tables which provide a detailed description of all decisions. Each of these tables can be reviewed by cliking on the corresponding tab at the bottom of the screen.
Errors and Warnings - Errors indicate corrections that should be made because of inconsistent decisions, while warnings draw attention to possible problems detected by the software that need to be checked carefully to make sure that the entry is correct.

37. 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
Once the team has come to a consensus on the decisions for the coming period, click on the 'interface' button and select the 'transfer decisions to instructor' option in the 'File' Menu in order to save your set of decisions on your data disk before handing it over to the administrator.

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