The 57th State

Undoubtedly the first time that you  looked at the Business Strategy Game (BSG), your heart stopped your jaw dropped and your brain fried.  The game is undoubtedly the most complex simulations I have ever came across in my college career and doing well in it entails a grade.  So the first thing to do is to Google it, right?  Yes and then having someone who played it tell you how to quickly get the hang of the ropes before you dig yourself a hole you will never get out of.

My first reaction was to Google “Business Strategy Guide” and the only helpful link that is shown is http://www.corvalliscommunitypages.com/How_To_Win_the_BSG_Business_Strategy_Game.htm

There is some great information here in the article “How to Win the BSG Business Strategy Game”, and in many ways is a good guide to get started, however there are some issues that I wish to address:

1. The article is not well organized and can be difficult to find things in at times.  My group resorted to using key word searches on the page(cntrl-f) to find info on particular topics. Often a topic is mentioned several times in the article in different areas, so you must find and read each instance to get all the information.

2. You may not be alone in discovering this article, since it is on the first page of a Google search for “Business Game Strategy”. Be aware one or more of the other groups may find it and try the same strategy, I will attempt to give some counters to the main strategy given.

3. The author is a raving, anti-free-market, communist nutcase and trying to dodge all his anti-capitalist spittle while mining the key information is tiresome.

So in conclusion, my goal here is to give you an easy to read quick start guide,  explain the strategy the other article entails, and  how to compete if the another team or two takes the same approach.  All minus the political tirades.

Overview of the Game

1. Read the Manual

Not reading the manual is a big mistake here.  The details can make or break a year in the game and one good or bad year can mean the difference between average and first place, so I would advise reading the manual before starting and then re-reading pieces of it as you make your turns.  Some items of it will not make sense till after playing a turn or two.  Unfortunately you can really screw up a turn in that amount of time.

2. Familiarize yourself with the Decision Entries

When you first click on the decision and report button, Decision Entries will be the top folder

Decision Entries includes the following:

Corporate Citizenship – Do expensive things to increase your image

Sales Forecast – Predict how much you are going to sell at given Price, Discount, Advertising, Celebrity Endorsment and so forth.  You can also clear unsold inventory here.

Plant Capacity – How much you can produce, your plant upgrades, build and purchase additional capacity

Branded Production – How much branded production you want to produce at what quality.  Any excess capacity will be available for the private label market

Branded Distribution – Where do you want to ship your shoes and where from.  Tarriffs and exchange rates are key here.

Internet Marketing – How you want to price your shoes and number of models.  See the internet/retail tradeoff

Wholesale Marketing – This is the closely related to the Sales Screen.  Any Pricing, Advertising, Rebate Offers, Retailer Support changes here will change the same items on the Sales Forecast screen and vice versa.  Keep an eye on the projected inventory levels and profit margins.

Bids for Celebrities – Bid for celebrities.  think of this as advertising.  It could be more or less cost effective than advertising.  You can do just fine without bidding for celebrities.

Private-Label Operations – Any excess left over from branded production will be available for the private label market. The use of private label can be a key strategic driver in some games.

Finance and Cash Flow – This is where you can buy back stock, make loans and pay dividends.

Trade offs

Several decisions you can make result in key trade offs.

Internet/Retail – The internet has only a fraction of the sales (5.2% at the start), but you get a lot higher margins by avoiding the middle man.  The downside is, if you sell the shoes too cheap, you will be hurting your retailers and they will reward you with less business the following year if your internet prices are to low.  (Less than 20% more than than your wholesale price to retailers)It is sometimes difficult, because countries like Europe have high costs of shoes because of tariffs.  If you lower the prices on your internet shoes to the optimum for profit, Europe retailers will drop you.

Celebrities/Advertising – Celebrities can be beneficial, but don’t overpay.  Plug their appeal into the Sales Forecast screen and see how much they help sales compared to raising advertising.  The total amount of cost you save in advertising in all 4 regions due to the celebrities appeal is the maximum you should bid for a celebrity.

Quick Start

Turn 1

1. Go to Finance and Cash Flow:

Set the dividend to something small like 5 or 10 cents.  Just make sure to up it by a penny each turn.  This will give you a high dividend growth rate.

Take out a huge 10 year loan.  (300m +) This will be the best time before your interest rates go up.

2. Go to Plant Capacity:

Build 2000 capacity in Latin America (LA) and another 2000 in Asia-Pacific (AP)

Buy Option B Upgrade.  this will lower the cost of your shoes considerably and will be expensive if bought later on. (this saves 7m when you have 500 models)

Optional – Sell your North American Plant.  You don’t need it in the long run.  It’s still better to keep till you are cash strapped and want to buy more production elsewhere.

3. Go to Branded Production:

Crank up Best Practices all the way up.  This will make your shoes cheaper overtime

Use all capacity including overtime (once you are using all the regular time, the overtime box will become ungreyed)

Up the number of models 50 or more.  The more models you have the more you will sell.

Try to keep TQM at 1.00 or more

Pick an S/Q Rating – try to stay between the 4-8 range.  too high and it won’t be cost effective, to low and retailers will buy less and inventory(which loses 1 star per year unsold) gets harder to move

Play with the percent of materials, styling and compensation till you get the lowest cost per pair for the quality you would like to reach

4. Go to Branded Distribution:

Try to spread out the shoes as evenly as possible.  Keep tariffs and currency exchange in mind.  See Tariffs and exchange rates for more info

5. Go to Sales Forecast:

Update the SQ rating you chose so your forecast is accurate

6. Go to Wholesale Marketing:

Play with prices, advertising and rebates till you sell all the shoes ( a cushion of -25  to -100 is even better) at the highest EPS you can get (EPS is the Earnings per Share on the left hand side)

7. Go to Internet Marketing

Play with the pricing and EPS, keeping in mind that any price not at least 20% more than a particular wholesale price will mean less retails in that region later on.

8. Go to Bids for Celebrities (Optional)

Make cheap bids on celebrities (6m or less), especially the ones with long contracts.  Keep in mind you are bidding on their cost per Year.

9. Private Label Marketing

If you are producing too much (you have to lower your margins to sell all your shoes) Go back to Branded Production and lower the amount of Branded shoes you are producing.  Then in the Private Label market, use all the excess capacity.  The first turn you can comfortably sell a small number of shoes at a modest profit. Possibly the only turn you can. Make sure you reach the minimum SQ requirement.  No More, no less

You will now need to to go back and repeat steps 4.

10. Corporate Citizenship (optional)

My opinion not worth the cost.  Better to get a good rating selling lots of good quality shoes. However if the the thought of not enough diversity in a virtual company keeps you up at night, then be my guest.

Still more to come.

I am in the process in re-reading the manual and through our recent BSG Screens to give high quality advice.  Drop a comment if you stumble on this article while its being written and I would be glad to help out.