The Markstrat - Week 2_pr

8/2/2019 The Markstrat - Week 2_pr

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PARIS – BOSTON

www.stratxsimulations.com

Overview of Markstrat World and

Business Game Practice



Markstrat is a simulation designed to focus

on strategic marketing issues

Understanding customer needs

Long-term perspectiveMarketing as a profit center

Competitive environment

Marketing strategy is based on segmentation, positioning, and resourceallocation... marketing mix decisions are secondary

You and your team have to:

• Target selected segments and position your products in a highlycompetitive market

• Interface with the R&D department to design and develop newproducts

• Prepare the launch of new products, improve, maintain or withdrawexisting ones

• Make marketing mix decisions



Gettingstarted

Managingyour firm

TheMarkstrat

World



The Markstrat World: A large territory with a

highly developed economy

The Markstrat World

Population: 250 million inhabitants

Currency: Markstrat Dollar ($)

Both inflation and GNP growth are fairly stable, no major political,social or economic event

It roughly behaves like most markets.

In the Markstart world, many companies manufacture and marketconsumer durable goods. These goods are comparable to electronicproducts as well as office equipment, cars, books and other consumerdurable goods.

With most scenarios, each firm starts in a different situation in terms of

product specification, target customer groups, brand awarenesslevels, market share, distribution coverage, profitability, R&Dexpertise.

No firm has a relative advantage over the others and initially has manycharacteritics in common.

The intial brand porfolio of all companies is comprised of 2 brands.



Each firm can compete in TWO product

markets

Maximum: 5 brands/firms marketed at a time

• independent

• not substitutes

• not complements

SONITES VODITES



SONITE PRODUCTS

At the beginning of the simulation, all rival firms market 2Sonite brands.

Sonite existed for several years, market has gron quiteconsistently

A Sonite is a complex piece of equipment made up ofseveral components with 5 most important physicalcharacteristics and base cost.

The base cost is an initial production batch of 100,000units (decided jointly by Marketing Dept and R&D Dept)



The Sonite market is already developed,

each product has 6 product characteristics

Weight(10 – 20)

Design(3-10)

Volume(20-100)

Max. Frequency(5 – 50)

Power(5-100)

Base Cost(min. 10)

Kg Index

dm3

kHz W



VODITE PRODUCTS

New type of electronic product migh emerge, called Vodite.

Industry experts predict this is a products of the futureVodite products will satisfy entirely different needs from that ofSonite products

The demand for the 2 products will be completely independent.

They are not complementary or substitution for each other.

Although Sonite and Vodie technologies are similar, all firms have toengage substantial R&D resources to develop their first Voditeproduct

An investment of about 10 million dollars may be required for eachVodite brand.



Vodites will also have 6 physical characteristics,

but the market is yet untapped

Autonomy(5-100)

Max. Frequency(5-20)

Diameter(10-100)

Design (3-10)

Weight(10-100)

Base Cost(min. 10)

m kHzmm

IndexKg





Sonite customers have traditionally been

classified into 5 segments……

SINGLES (Si)

PROFESSIONALS (Pr)

BUFFS (Bf)

HIGH EARNERS (Hi)

OTHERS (Ot)



...whereas initial studies for Vodites have pointed

to a different segmentation scheme

Followers

EarlyAdopters

Innovators

Sales

Time

Typical segment size evolution over time



Sonite & Vodite customers can choose to purchase

through 3 distinct Distribution Channels

SpecialtyStores

DepartmentStores

MassMerchandisers

These stores are usuallysmall, geographically close tocustomers, has high level ofservice and technicalsupport. Not many different

product categories, but broadlines for each category.

Has wide productassortment. Provideextensive customer servicebut lower technical support

than SS.

Operate on low-price, high-volumebasis and try to minimizeoverheads. Level of serviceoffered is lower than these othertwo. Carry many different product

categories, but not deep at eachproduct line.



Summary of the Markstrat World

Technology MarketGrowth EconomicEnvironment



Gettingstarted

TheMarkstrat

World

Managingyour firm



Your objective in managing your company is to

maximize your Stock Price Index

You will have to decide the overalldirection of the company, regarding:• Product portfolio strategy

• Segmentation and positioning strategy

• Marketing mix strategy

You will have to optimize:• Market share

• Sales growth

• Net contribution• Cumulative net contribution

• R & D investments

….but the main objective is to LEARN!

ll d d f l



You will need to do a certain amount of analysis,

before setting a strategic direction for your firm

Data

InformationStrategicOptions

R h di id k d i i



Research studies provide market data, it is up to

you to prioritize, digest & interpret them

Consumer survey

Consumer panel

Distribution panel

Semantic scales

Multi-dimensionalscaling (MDS)

Industry benchmarking

Market forecast

Competitive advertising

Competitive sales force

Advertising experiment

Sales force experiment

Conjoint analysis

O t t i l h ld k



Once your strategy is clear, you should make

a number of tactical decisions each year

Production planning

Inventory disposal

Pricing

Mass communication

Sales force & distribution

Market research



PRODUCTION

Each period, you are responsible for submitting a production plan for

each of your marketed brands.

In case of unsuccessful brand, you can decrease the inventory orsell all or part of it to a trading company at some cost/loss.

You are completely free to increase or decrease the productionplanning of a given product, without any penalty.

The units produced are charged to the Marketing Dept only whenthey are sold to distributors. The price paid to production is calledthe transfer cost .

Inventory-holding costs are charged to Marketing Dept in case units

produced are excessive to be kept in inventory.The transfer cost of a given product increases with inflation.



Inventorybuild-up

Lostsales

Number ofUnits

QP(1-20%)

(assuming zeroinventory level)

QP(1+20%)

Production Department adjustment

Marketdemand

ProductionQP

Requestedproduction

level

Your production department will automatically adjust production

levels (+ or -) 20% against your plan

C i h i t t ith k t h



Competitors

“Order -book”

Lost to industry

Comparing purchase intent with market share

can give you a feel for the size of "lost sales."

Purchase

Intent

Market

Share

Lost

Sales



PRICING

In Markstrat, you must set the recommended retail price for eachmarketed brand

The retail price is the list price for customers

The average selling price is the price at which you sell your product

to distrbutors. It varies according to distribution channel because ofdifferent margins.

Notice that mass merchandisers use promotions or special offers tosell products to a discount rate of 10% off the list price.

Dumping is strictly forbidden in Markstrat world, so the selling price

must be higher than its transfer cost.Price increase or decrease greater than 30% in one period arehighly discouraged.



Pricing in Markstrat is fixed once a year

Specialty

Stores

Department

Stores

Mass

Merchandisers

Average RetailPrice $100 $100 $90

Distrib. Margin

$40 $ 30 $ 27 Average Selling

Price $ 60 $ 70 $ 63

Recommended Retail Price = $100



COMMUNICATION

You should determine the advertising budget allocated toeach brand. The budget is used to:• Purchase media space and time (advertising media ). This

includes buying media space and time.

• Do advertising research (advertising research ). This includes

creative work, media selection and other activities to make surethe quality of your message.

• Companies devoted on average 7% of their total communicationexpenditures to advertising research.

• You need to specify which segments to be targeted with your

advertising• You finally must decide perceptual advertising objectives for

each brand.



SALES FORCE

Your sales force is organized in 3 groups

Each group is specialized to focus on the stores of asingle distribution channel

Marketing Dept must specify the number of salespeoplein each group

Salespeople may be reallocated from one channel to theother at no cost.

But hiring or firing costs will be charged to yourdepartment when the total number of salespeopleincreases or decreases.



ORDERING MARKET RESEARCH STUDIES

One of your decisions will be to order market research

studies.

All studies are ordered at the beginning of a period. Theresults are delivered with your annual report at the end

of the period.

A maximum of 23 different studies may be ordered eachperiod.



RESEARCH & DEVELOPMENT

Making R&D decisions is a crucial task

The Marketing Dept must specify the desiredcharacteristics for the new or improved product,including the target transfer cost.

You must also allocate a budget to each project



MARKETING BUDGET

Your marketing budget is linked to the success of thedepartment, being equal to 40% of the net contribution inthe previous period.

In general, your budget for each period will be between $

7,000,000 and 20,000,000. You will work within thisgiven budget.

Each firm receives a marketing budget for the



Each firm receives a marketing budget for the

coming period

The budget amount is based on the previous period’s performance

B u d g e t

MarketResearch

Sonite and Voditestudy costs

for eachproject

R&D Development budget

Sales force Hiring & training cost

Firing cost

Operating cost

for eachbrand

Advertising Advertising researchexpenditures

Advertising expenditures



UNDERSTANDING YOUR ANNUAL REPORT

INDUSTRY NEWSLETTER

This provides general and financial data on the industry, on thecompeting firms and on marketed brands. All firms have access tothe same Industry Newsletter

Stock market and key performance indicators: charts with variousindicators such as: market shares, sales, contribution, stock priceindices and return on investment ratios.

Economic variables and costs: the evolution of economic variablessuch as the inflation rate and GNP growth rate and various costs like

salespeople, inventory cost, etc.Information on Sonite market: physical characteristics and price ofall marketed Sonite products and indicates which brands have beenrecently improved or introduced. Also provides market shares,volume sold and retail sales of all Sonite products.



UNDERSTANDING YOUR ANNUAL REPORT

COMPANY REPORT

This provides confidential company information. You andyour team are the only ones who have access to theinformation disclosed in your Company Report. This

includes:• Company results

• Brand results

• Research & Development results

• Cumulative results• Decision summary



Brand results



Company performance



MARKET RESEARCH STUDIES

Industry benchmarking: general information from annual reportsabout each of the Markstrat competitors.

Consumer survey: provides information on

• Level of brand awareness (consumers in each segment who can recalla given brand name)

• Brand purchase intentions (consumers in each segment who intendedto buy a given brand)

• Shopping habits (consumers who prefer to shop in a given distributionchannel)

Consumer panel: total unit sales for each segment, the relative size

of each segment, market shares, based on unit sold for each brandin each segment.

Distribution panel: total sales in units in each distribution channel,relative size of each channel, market shares for each brand in eachchannel




Semantic scales: respondents are asked to rate each brand along

each physical characteristics on a scale from 1 to 7. it provides theimportance of each characteristic, or the weight each characteristicholds in the buying decision.

Multidimensional scaling of brand similarities and preferences:

• One of the most important studies that may be purchased by your team.

• It provides a map showing similarities and differences betweenmarketed brands on three different dimensions.

Market forecast: this study estimates the expected size in units andthe growth rate of each segment for next period and in 5 years time.

Competitive advertising estimates: estimates the total advertising

expenditures for each competitive brand by segment.Competitive sales force estimates: estimates the number ofsalespeople allocated to each brand and provides average salesforce size by brand and by firm




Advertising experiment: this study estimates the effects of increasingyour advertising budget by a given percentage. It projects brandawareness and market share for each of your brands.

Sales force experiment: the sales force experiment predicts theincreased distribution coverage and market share for each of yourbrands.

Conjoint analysis: it provides the utilities – the real number betweenfrom 0 to 1 for each of the 4 most important characteristics for eachsegment, higher to 1 indicates high consumer preference.

h l h d f h l d



The simulation starts at the end of the initial period

.

. The newmanagement (you!)make decisions for

the next period

The decisions for the first period are limited



The decisions for the first period are limited

in scope

Your team can get familiar 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

Organize yourselves and manage the group



g y g g p

process

Timepressure

Conflictingopinions

Informationoverload



TheMarkstrat

World

Managingyour firm

Gettingstarted

When you return to your team room,



y y

the Main Menu will be on your screen

Click here toaccess session

information

You can access all the decisions on the main



screen to make decisions for the next period

The decisionsyou will make

Marketing Mix decisions should be entered for



g

each brand

You aremaking

decisions forthe brand

SAMA

Switch fromSonites to

Vodites

The sales force is organized by channel type to



meet the specific needs of the channels

Click on theassistant to helpyou allocate to

sales forcesautomatically

Buying market research studies will help you



make sound decisions

The cost ofeach studyappears as

you make yourselections

You can monitor the status of your decisions



at any time

Don't forget to transfer your decisions to



your instructor by closing the session

You can closeyour session by

clicking onInterface/Close

Markstrat Sessionor just click here

O k t t GO!



On your marks, get set, GO!

Respect the deadlines

Documents

The Markstrat - Week 2_pr