stratsim marketing intro

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1 StratSimMarketing The Marketing Strategy The Marketing Strategy Simulation Simulation

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Page 1: StratSim Marketing Intro

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StratSimMarketing

The Marketing Strategy SimulationThe Marketing Strategy Simulation

Page 2: StratSim Marketing Intro

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StratSimMarketing

Ties It All Together:• Marketing• Product Development• Manufacturing• Finance• HR

IntegratedLong-TermMarket-focused

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StratSim Environment

• Currently, low GDP and inflation growth rates

• Demand sensitive to GDP, interest rates, and

decisions that you make as an industry

• Maximum of 10 yearly decisions

• Based on the Automobile Industry

• Two Markets: Consumer & Fleet (B2B)

• Consumer market of 150 million people

• B2B market of numerous fleet contracts

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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

(E)conomy, (F)amily, (S)ports, (L)uxury, (M)inivan, (U)tility, and (T)ruck

(H)ybrid & (D)elivery

• 7 Product Classes with Existing Vehicles:

• Plus two potential new classes if developed:

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StratSim Environment• Competitors: 5 Firms (A-E)• Each firm has 3 vehicles on the market

• Amazing Cars (A)• Best Motor Works (B)• Cool Cars (C)• Driven Motor Co. (D)• Efficient Motors (E)

Alec (E)*, Alfa (F), Awesome (U) Beaut (L), Boffo (F), Buzzy (S) Cafav (F), Camini (M), Climax (L) Defy (F), Delite (E), Detonka (T) Evan (M), Estruck (T), Euro (U)

* Corresponds to Product Class

• The firms have different strengths and weaknesses and are uniquely positioned in the market

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StratSim Environment• Competitors: 5 Firms (A-E)

• Starting positions on several key performance measures:

Manuf. Market Net Income Stock Sales (B$) Share ($) (B$) Price ($)

Firm A 26.9 28.6% 1.5 48Firm B 11.7 12.4% 1.6 46Firm C 13.6 14.4% 1.6 47Firm D 22.9 24.3% 1.5 46Firm E 19.1 20.3% 1.6 47

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Industry OverviewClass Position Segments Vehicles Example

Economy SmallerLow Price

1, 2 Alec, Delite

Family Mid SizeMid Price

2, 4 Alfa, Boffo, Cafav, Defy

Luxury Larger, Expensive

4, 5 Beaut, Climax

Sports Mid SizeMid Price

3 Buzzy

Minivan Larger, Mid Price

2 Camini, Evan

Utility Larger, Mid-High Price

3, 5 Euro, Awesome

Truck Mid-Large Size, Mid Price

1, 3 Detonka, Estruck

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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)

SegmentsValue Seekers (1)Families (2)Singles (3)High Income (4)Enterprisers (5)

… New customers may emerge

Customers1E, 1T

2E, 2F, 2M3S, 3T, 3U

4F, 4L5L, 5U

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Consumer MarketPurchase 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 MarketPurchase 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• Customers weigh this bundle of goods against the price charged

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B2B Market (optional)• New Opportunity in “Fleet” Sales (Currently no sales in this market)• Direct sales to:

•Rental car companies (6) (e.g. Hertz)•Delivery fleets (7) (e.g. FedEx) •Other (8)

• Some may accept current vehicle offerings; others may require a customized product

• All are national accounts and require a direct sales force to serve the market

• Contracts awarded only to those companies who meet requirements• Contracts awarded by a Decision-Making Unit (DMU).

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B2B Market (optional)

• Direct Sales Force secures invitation to bid on contract and influences DMUs

• Unit sales awarded to qualifying vehicles/firms based on the following rules:

• Guaranteed contract amount if your firm meets the contract requirements

• Double that quantity if your firm is chosen as preferred supplier

• Example: Rental Company has a contract for 30K economy cars. If you qualify and produce enough, you will sell 30K of your economy vehicle. If you are preferred supplier, you will sell 60K units.

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B2B Market (optional)

• Adds potentially lucrative target markets to the environment, but

requires additional management time and resources

• Make sure you meet minimum requirements

• Consider impact on margins and production

• Think about synergies (or not) between B2B customers and consumer

customers

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Decisions

• Technology• Concept Creation• Product Development• Consumer Marketing• B2B Marketing (optional)• Manufacturing• Distribution• Licensing (optional)• Finance

IntegratedLong-TermMarket-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: Firm A’s technology profile is 4, 5, 4, 5, meaning that 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

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Technology

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 Development4 General Approaches:

• Minor Upgrade: Based on existing product, uses 1 center for 1 decision period, impacts results when advanced (immediate)

• Major Upgrade: Based on existing product, uses 1 center for 2 decision periods, impacts results in 1 year

• New Product, Same Class: Based on concept, uses 1 center for 2 decision periods, impacts results in 1 year

• New Product, New Class: Based on concept, uses 1 center for 3 decision periods, impacts results in 2 years

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Product DevelopmentProduct Development Timelines(Exhibit on page 12 in manual)

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Product DevelopmentExample:

• If, in the 1st decision period, a firm initiates a minor upgrade and a new product in a new class…

• …and if, in the following period, the firm would like to initiate two more upgrades, the firm would have to choose among the following:

• Build a new development center in the 1st decision period so they would have 3 operational centers in the following period

• Only choose one upgrade (because the new product would occupy one center)

• Choose to discontinue development of the new product to free a development center.

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Product DevelopmentSample development screen showing an upgrade (Alfa), new product (Aphid), and a new development center:

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Consumer MarketingCorporate Level:

• Budget set by region (North, South, East, West) to create general firm preference and support dealerships

• Public relations to create interest in firmdevelopments

• Direct Mail to different consumer segments

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Consumer MarketingProduct 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 MarketingProduct Level: Pricing

• MSRP = Manufacturer’s Suggested Retail Price used to position vehicle, set expected price

• Dealer Discount - % discount to dealer• Actual selling price determined by dealer

• MSRP - discount = Actual revenues to your firm

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Consumer Marketing

Consumer Marketing Decisions Screen

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B2B Marketing (optional)• B2B Customers have requirements that must be met in order to

obtain a contract:• Equal To or Below Maximum Price• Equal To or Above Minimum Specifications• Dealership Coverage in ALL regions• Specific Vehicle Class• Within Requested Size and Engine Ranges

• Decision process is made by a “Decision-Making Unit” (DMU) consisting of:

• Fleet Manager• Managing Director• Finance Director• Purchasing

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B2B Marketing (optional)• Initial Period – Hire a Sales Force

• Salespeople establish a relationship, secure invitations to bid on a contract, win the contract, and maintain an on-going relationship with the customer. Requires 4-8 salespeople PER CONTRACT.

• Segment Level Decisions• Direct Sales Force (#)• Prioritize focus by DMU• Direct Mail ($)

• Contract Level Decisions• Choose one vehicle for contract (must meet all requirements)• Set bid price (must be less than maximum)

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ManufacturingCapacity

• Total vehicle production must be less than capacity or incur over-capacity 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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ManufacturingProduction

• 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

• Set flexible production (+/- 10%)

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Manufacturing

Note over-capacity (1845>1800) and resulting charge

… andAlfa 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

… and 20 new dealerships started

Note Coverage (= established / full)

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Licensing (optional)• One firm makes “offer” to another firm that specifies vehicle class,

size, HP, and minimum specifications – The “licensee”• The firm that receives the offer must have a vehicle that meets the

requirements and they must accept the offer – The “licensor”• Additional terms to be negotiated:

• Price licensee pays per vehicle• Units purchased• Any additional fees

• License is re-entered each period (even if you negotiate a long-term agreement)

• Once licensor accepts the offer, it is a legally binding contract.

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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

Bonds are callable after three years

To repurchase stock, enter a negative value ($)

Click here to issue bonds and stock

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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

• Performance Summary• Income Statement• Balance Sheet• Cash Flow Statement• Product Contribution

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Market Reports

Market Analysis

• Industry News• Economy• Vehicle Classes• Regional Sales• Consumer Segments• Consumer Customers• New Customers• B2B Segments• B2B Contracts

Page 41: StratSim Marketing Intro

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Competition Reports

Competitive Analysis

• 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

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Decisions Menu

• Input Decisions• Technology• Concept Creation• Product Development• Consumer Marketing• B2B Marketing• Manufacturing• Distribution

• Licensing• Financing• ProForma• 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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Simulation Process

See Sections 3 and 4 of Manual

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Login (Course Website)

First, login to your class website

Login to your class site using your (assigned) user ID and password

Go to www.interpretive.com/students

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Course Website

From your class website, download

the manual (pdf file)

Access the simulation

(download the software)

Order simulation here (one for each

student)

Plus many other options – explore!

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Login (Simulation Software)

To enter StratSimMarketing, click

on the Login button

Then enter user ID and password and

click OK

From the Login page, download the software from our Internet site

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Menus (Navigation Index)

Some reports are free; others must be purchased ($)

Start-up includeshelpful information

(the briefing is a goodplace to start)

Internal providesreports for your

firm, such asfinancial statements

and cash flowTools contains

market and competitive research

studies ($)

Decisions is where your firm will enter

and review decisions each period

Market contains information about general economic

conditions and customers (free)

Competition reports contain detailed

information about your competitors

(free)

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For example, the Internal menu includes your firm’s Income Statement report…

Report Options

Within each report, use options such as the [Graph] and [History] buttons for additional analyses

…with Graph and History options…

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Help Windows

There is also a help index which parallels the StratSimMarketing menu structure.

Click the Help button on any report, summary, or decision form for context-sensitive information

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Consult FAQ’s

… or consult the FAQ’s on the student website

… or contact Interpretive

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Compare your ResultsFinally, see how your strategy is working --- compare your results with other teams in your class.

See how you’re doing compared with your classmates

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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!

• Please print out decision summary and pro-forma income statement when your team is done entering your 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

• 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!