Transcript intro_slides SMU

StratSimMarketing
Introduction
StratSimMarketing Content
In this computer simulation, your team will take over the
management of one of five automobile manufacturing companies for
six (6) simulated years and make decisions in the areas of:
• Marketing
• Product Development
• Manufacturing
• Finance
• Human Resources
Integrated long-term market-focused strategy.
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StratSim Environment
Based on the Automobile Industry.
Two Markets: Consumer & Fleet (B2B)
Consumer market of 150 million people.
Currently, low GDP and inflation growth rates.
Demand sensitive to GDP, interest rates, and decisions that you
make as an industry.
• Six decision making periods.
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StratSim Environment
The Products: Cars & Trucks
Principle Characteristics
Vehicle Class
Size
Engine / Performance
Interior
Styling
Safety
Quality
…and Price
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StratSim Environment
7 Product Classes with Existing Vehicles:
 (E)conomy
 (F)amily
 (S)ports
(M)inivan
(U)tility
(T)ruck
 (L)uxury
Plus two potential new classes if developed:
(A)EVs
(D)elivery*
* B2B only.
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StratSim Environment
• Competitors: 5 Firms (A-E)
• Each firm has 3 vehicles on the market.
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Amazing Cars ( A ) . . . . . . . . . . . ALFA ( F )*, ALEC ( E ), AWESOME ( U )
Best Motor Works ( B ). . . . . . . . BOFFO ( F ), BEAUT ( L ), BUZZY ( S )
Cool Cars ( C ). . . . . . . . . . . . . . . CAFAV ( F), CAMINI ( M ), CLIMAX ( L )
Driven Motor Co. ( D ) . . . . . . . . .DEFY ( F ), DELITE ( E ), DETONKA ( T )
Efficient Motors ( E ) . . . . . . . . . .EFIZZ ( F ), ESTRUCK ( T ), EURO ( U )
• The firms have different strengths and weaknesses and are
uniquely positioned in the market.
* Corresponds to Product Class.
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StratSim Environment
• Competitors: 5 Firms (A-E)
• Starting positions on several key performance measures:
MANUF.
SALES
( B$ )
MARKET
NET
SHARE INCOME
($)
( B$ )
STOCK
PRICE
($)
FIRM A
20.5
23.7%
1.8
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FIRM B
12.9
14.9%
1.8
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FIRM C
13.7
15.8%
1.7
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FIRM D
19.3
22.4%
1.7
50
FIRM E
20.1
23.2%
1.7
50
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Industry Overview
CLASS
POSITION
SEGMENTS
VEHICLES
Economy
Smaller
Low Price
1, 2
Alec, Delite
Family
Mid Size
Mid Price
2, 4
Alfa, Boffo, Cafav, Defy,
Efizz
Luxury
Larger
Expensive
4, 5
Beaut, Climax
Sports
Mid Size
Mid Price
3
Buzzy
Minivan
Larger
Mid Price
2
Camini
Utility
Larger
Mid-High Price
3, 5
Euro, Awesome
Truck
Mid-Large Size
Mid Price
1, 3
Detonka, Estruck
EXAMPLE
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Consumer Market
5 consumer segments (1–5) with different
needs and class preferences.
Customer = Intersection of segment and class
(e.g., 1T is a value seeker who wants a truck)
Segments:
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Value Seekers (1)
Families (2)
Singles (3)
High Income (4)
Enterprisers (5)
Customers:
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1E, 1T
2E, 2F, 2M
3S, 3T, 3U
4F, 4L
5L, 5U
…New customers may emerge!
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Consumer Market
Purchase Process
• Customers have different needs
and expectations with regard to
vehicle characteristics.
• Customer "consideration set"
based on product class, size,
and MSRP.
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Consumer Market
Purchase Process
• Customers prefer a particular size vehicle.
• Customers prefer a specific engine size due to the trade-off
between performance and fuel economy.
• Customers prefer better (more) Interior, Styling, Safety, and Quality
("ISSQ").
• Customers weigh this bundle of goods against the price charged.
Hints: Customers may have certain "hot buttons" or attributes that are
particularly important to them, and some customers may be more Price
sensitive than others.
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Decisions Overview
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Technology
Product Development
Consumer Marketing
Manufacturing
Distribution
Licensing (optional)
Finance
Integrated Long-Term Market-Focused.
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Technology
• Each firm has an overall technology capability with
regard to Interior, Styling, Safety, and Quality that can be
improved through investment in technology.
• For Example: If firm A’s technology profile is 4, 5, 4, 5, it can
develop and/or upgrade vehicles to these maximum
specifications.
• A firm with greater technology capability can produce vehicles with
better features in these areas AND produce vehicles with the same
features at lower per unit cost.
• Weigh benefit against cost of investment.
Important: Investing in technology does not automatically improve the
specifications of your products, only your ability to do so through upgrades.
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Technology
Cost of Investment and
Estimated Benefit.
Click here to change your
Technology Capabilities.
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Concept Creation
• To introduce a new product, a firm must first develop
a product concept.
• A concept consists of all the
vehicle specifications (class,
size, engine, attributes).
• Your firm will receive feedback on
the unit cost, development cost,
and time to develop.
• Your firm may also run a concept
test to see how a customer views
your concept.
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Product Development
• Product Development takes place in
"Development Centers".
• New products move from concept to development in one of the
centers.
• Upgrades also take place in the centers.
• Each firm starts with 2 development centers allowing concurrent
development on two products (new products or upgrades).
• New development centers can be added over time up to a
maximum of five (one per period).
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Product Development
4 General Approaches:
• Minor Upgrade: Based on existing product, uses 1 center for 1
decision period, prepare launch now (immediate impact after
advance). Inventory disposed now.
 "tweak" – Max. change of 2 size, 5 HP, 1 other specs.
• Major Upgrade: Based on existing product, uses 1 center for 2
decision periods, prepare launch next decision (1 year). Inventory
disposed next year.
 Max change of 10 size, 20 HP, 2 other specs + "tweak" next year
• New Product, Same Class: Based on concept, uses 1 center for 2
decision periods, prepare launch next decision (1 year).
• New Product, New Class: Based on concept, uses 1 center for 3
decision periods, prepare launch in two years.
 Use concept test for new products to measure "quality" of your offering.
Balance opportunities, speed to market, cost, and need for change.
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Product Development
• To introduce a new product (new
brand name, not an upgrade), a firm
must first develop a product concept.
• A concept consists of all the vehicle
specifications (class, size, engine,
attributes).
• Your firm will receive feedback on the
unit cost, development cost, and time
to develop.
• Your firm may also run a concept test
to see how a customer views your
concept.
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Product Development
Minor Upgrade
$100-$300 Million
in current year
Product
Development
Timelines
(From the
StratSim
Case)
Major Upgrade
$250-$750 Million
Spread over 2 years
New Product
(Existing class)
$250-$1,500 Mill.
Spread over 2 years
New Product
(New class)
$500-$2,500 Mill.
Spread over 3 years
Licensing
(Optional feature)
Immediate
Negotiate with
Licensor
Results for
Period N1
Decisions for N+12
Results for
Period N+1
Decisions for N+2
Results for
Period N+2
Decisions for N+3
Results for
Period N+3
Modify Specs
In Dev. Center
Adjust Marketing Mix
Adjust Production (Inventory disposed)
In Market
Results impacted.
(Including sales, retooling,
inventory write-off)
In Market
In Market
Modify Specs
In Dev. Center
Build Add’l Capacity
Modify Specs
In Dev. Center
Adjust Marketing Mix
Adjust Production
(Inventory disposed)
In Market
Results impacted.
(Including sales,
retooling, inventory
write-off)
In Market
Create Concept
Name Product
Modify Specs
In Dev. Center
Build Add’l Capacity
Modify Specs
In Dev. Center
Set Marketing Mix
Set Production
In Market
Results impacted.
(Including sales,
retooling)
In Market
Create Concept
Name Product
Modify Specs
In Dev. Center
Modify Specs
In Dev. Center
Build Add’l Capacity
Modify Specs
In Dev. Center
Set Marketing Mix
Set Production
In Market
Results
impacted.
Including sales,
retooling)
Negotiation of terms of
license, make and accept offer,
enter marketing mix decisions
In Market
Results impacted by
license launch. Revenues to
licensor. Re-enter terms of
license (ore renegotiate)
In Market
In Market
1 Period "N" is the period just completed for which you are now currently reviewing results; e.g.: Period 1
2 Period "N+1" is the period for which you are now making decisions. It is the period for which results will be created as the simulation is
advanced after the current decisions are completed; e.g.: Period 2.
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Product Development
Example:
• In the 1st decision period, a firm initiates a minor upgrade
and a new product in a new class…
• If, in the following period, the firm thinks it will want to initiate
two more upgrades, what are its options?
 Build a new development center in the 1st decision period so they
would have 3 operational centers in the 2nd decision period.
 Only choose one upgrade in the 2nd period (because the new product
would occupy one development center).
 Choose to discontinue development of the new product to free a
development center.
Hints: Be sure to plan development time lines and development capacity.
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Product Development
Sample development screen showing an upgrade
(Alfa), new product (Aphid), and a new
development center:
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Consumer Marketing
Corporate Level
• Budget set by region (North, South, East, West) to create general
firm preference and support dealerships.
• Public relations to create interest in firm developments.
• Direct Mail to different consumer segments.
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Consumer Marketing
Product Level: Advertising and Promotion
• Advertising budget to build and maintain awareness.
• Advertising theme (performance, interior, style, safety, quality) to
appeal to target segment’s "hot button".
• Promotion budget to help spur sales during slow periods used for
rebates, special financing, attractive leases, etc.
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Consumer Marketing
Product Level: Pricing
• MSRP = Manufacturer’s Suggested Retail Price used to position
vehicle, set expected price in mind of consumer and dealership.
• Dealer Discount = % discount off MSRP to dealer
MSRP - discount = Actual revenues to your firm
• Actual selling price to consumer (retail price) determined by
dealer.
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Consumer Marketing
Consumer
Marketing
Decision Screen
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Manufacturing
Capacity
• Total vehicle production must be less than capacity or incur overcapacity charges.
• Capacity may be increased, but takes one year before available
and costs $$$.
• Plant investment is depreciated over 10 years.
• Maximum increase (or decrease) in a year is 50% of current
capacity.
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Manufacturing
Production
• Set production based on YOUR sales forecasts and inventory
levels.
• Retooling costs for initial or increased production.
• Remember there is a cost to dispose of inventory of old vehicles
if upgraded (minor or major).
• Set flexible production (+/- 10%).
 Adjusts production if > 120 days or insufficient to meet orders.
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Manufacturing
Note over-capacity
( 1845 > 1800 ) and
resulting charge…
…and Alfa inventory
write-off (upgrade).
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Distribution
• Dealerships make the actual sale to consumer.
• Set up on a regional basis (North, South, East, West).
• Can open or close dealerships (max of 10% change each year and
takes 1 year to open/close).
• Dealer ratings (1-100 scale) indicate customer experience at
dealership, impacted by:
 Profitability and product offerings.
 Training, education and support.
 Dealer discounts and servicing.
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Distribution
Note Coverage
( = established / full)
…and 20 new
dealerships started.
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Finance
Uses of cash (long-term investment
decisions):
• Technology, product development, capacity, retooling,
advertising, distribution, repurchase of bonds and stock,
repayment of loans.
Sources of cash:
• Operations, selling bonds and stock, short-term borrowing.
• Use Pro-Forma to see likely impact on cash position based on
YOUR forecasts and decisions.
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Finance
Click here to issue
bonds and stock.
• To repurchase stock,
enter a negative value ($).
• Bonds are callable after
three years.
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Financial Performance
• Financial Statements
income statement,
balance sheets
cash flow
• Stock price and bond ratings
• Use Pro-Forma reports to see
likely impact on performance
based on YOUR forecasts and
decisions.
Actual Results Will Vary.
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Internal Reports
Internal Analysis:
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Performance Summary
Income Statement
Balance Sheet
Cash Flow Statement
Product Contribution
Marketing
Distribution
Manufacturing
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Market Reports
Market Analysis:
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Industry News
Economy
Vehicle Classes
Regional Sales
Consumer Segments
Consumer Customers
New Customers
B2B Segments*
B2B Contracts
* B2B reports are optional and will be displayed
only if selected.
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Competition Reports
Competitive Analysis:
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Products
Market Share
Technology
Marketing Communications
Distribution
Manufacturing
Financials
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Tools and Research
Tools Available:
• Vehicle Sales by
Customer($)
• Focus Groups ($)
• Concept Test ($)
• Competitive Mapping ($)
• Perceptual Mapping ($)
• Test Market ($)
• Conjoint Analysis
• Portfolio Analysis
Note: Tools available will vary based on customization selected.
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Decisions Menu
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Technology
Product Development
Consumer Marketing
B2B Marketing (optional)
Distribution
Licensing (optional)
Manufacturing
Financing
Decision Summary
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Decision Summary
Check your decisions on
the Decision Summary
screen (Decisions menu)
before the simulation is
advanced to the next
period.
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Decision Analysis
Check Decision Alerts!
on the Decision Analysis
menu before the
simulation is advanced to
check for warning
messages before your
decision deadline.
Use the Pro-forma to
enter your forecasts and
help you to determine
your best course of action.
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StratSim Logistics
• All decisions are saved on the server, so you must
be online.
• Everyone on the same team shares ONE decision file, so when
one person makes a change, the whole team makes that change.
In addition, when one team member purchases a tool, the whole
team purchases the tool. In other words, organize your decision
process!
• It is recommended that you print out decision summary and proforma income statement when your team is done entering its
decisions.
• Decisions must be completed on time.
• Results will be available at beginning of next meeting time.
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Final Considerations
• Your strategy drives your decisions – make sure
you have one!
• Focus on how to best serve your target markets through a total
offering – product, marketing, service, and price.
• Importance of team organization – HR.
• Manage your margins – understand financial implications of
decisions.
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Understand fixed and variable costs.
Long term vs. short term.
Make wise investments.
Use the Pro-Forma for insights BEFORE finalizing decisions.
• Try new approaches – apply concepts – experiment – have fun!
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