how to win the bsg

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Find this page useful? Use Paypal to donate a few bucks to pay for the server HOW TO WIN THE BSG (BSGONLINE) BUSINESS STRATEGY GAME A SHORT TUTORIAL ON BECOMING A CORPORATE BEHEMOTH IN 12 WEEKS OR LESS THE EXPERIENCES OF SEVERAL HUNDRED TEAMS, INCLUDING A DOZEN GLOBAL CHAMPIONS AND TOO MANY TOP 20 TEAMS TO COUNT Note: Since first publishing this account in 2005, I have received numerous replies, accounts and inquiries from others who have played the game and excelled, and have included their suggestions here. It was originally written in 2005 and was last updated in October, 2014. This page has no connection whatsoever with McGraw Hill. It is simply one group of students providing information to others who come after them. Every semester/term since this page was first posted, students have written to give their own input on the BSG, and you are welcome to give us your additions also. We will post all new insights. Please do not think that you will automatically become global champions by following the advice on this page. That's sometimes a simple feat, in regions where one's neighbors are generally boneheads. It's a much more difficult affair where detached observation of the strategy of one's opponent is second nature for all. The BSGonline game is very complex, with numerous variables and a deceptively simple framework which leaves many students struggling to find a strategy capable of winning the game. Grades, and for those relying upon employerpaid tuition/books costs dependent on those grades, can suffer horribly. Often, the class is only offered Spring term of a senior year. Flunk it, and you will at best be a five year senior, and the likelihood of not being able for one reason or another to return to complete a degree, is very great. To a certain extent, even the "winners" of this game are simply those whose opponents find themselves more "at sea". Most students are simply given the url of the game, and told to begin with very little preliminary explanations on the part of a professor. If that is true for you, then you have come upon what will likely be your best resource for explaining the game's mechanism in everyday language. But this page is not superior to the game manual, available at your "Corporate Lobby" (although the look of the lobby shifts from year to year) under the heading of Player's Manual, which you should read thoroughly. At least twice. If your instructor gives some few

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  • 2/4/2015 HOWTOWINTHEBSG

    http://corvallistoday.com/bsgimages/bsgrev2.html 1/29

    Findthispageuseful?UsePaypaltodonateafewbuckstopayfortheserver

    HOWTOWINTHEBSG(BSGONLINE)BUSINESSSTRATEGYGAME

    ASHORTTUTORIALONBECOMINGACORPORATEBEHEMOTHIN12WEEKSORLESSTHEEXPERIENCESOFSEVERALHUNDREDTEAMS,INCLUDINGADOZENGLOBALCHAMPIONSANDTOOMANYTOP20TEAMSTOCOUNT

    Note:Sincefirstpublishingthisaccountin2005,Ihavereceivednumerousreplies,accountsandinquiriesfromotherswhohaveplayedthegameandexcelled,andhaveincludedtheirsuggestionshere.Itwasoriginallywrittenin2005andwaslastupdatedinOctober,2014.

    ThispagehasnoconnectionwhatsoeverwithMcGrawHill.Itissimplyonegroupofstudentsprovidinginformationtootherswhocomeafterthem.Everysemester/termsincethispagewasfirstposted,studentshavewrittentogivetheirowninputontheBSG,andyouarewelcometogiveusyouradditionsalso.Wewillpostallnewinsights.Pleasedonotthinkthatyouwillautomaticallybecomeglobalchampionsbyfollowingtheadviceonthispage.That'ssometimesasimplefeat,inregionswhereone'sneighborsaregenerallyboneheads.It'samuchmoredifficultaffairwheredetachedobservationofthestrategyofone'sopponentissecondnatureforall.

    TheBSGonlinegameisverycomplex,withnumerousvariablesandadeceptivelysimpleframeworkwhichleavesmanystudentsstrugglingtofindastrategycapableofwinningthegame.Grades,andforthoserelyinguponemployerpaidtuition/bookscostsdependentonthosegrades,cansufferhorribly.Often,theclassisonlyofferedSpringtermofasenioryear.Flunkit,andyouwillatbestbeafiveyearsenior,andthelikelihoodofnotbeingableforonereasonoranothertoreturntocompleteadegree,isverygreat.Toacertainextent,eventhe"winners"ofthisgamearesimplythosewhoseopponentsfindthemselvesmore"atsea".Moststudentsaresimplygiventheurlofthegame,andtoldtobeginwithverylittlepreliminaryexplanationsonthepartofaprofessor.Ifthatistrueforyou,thenyouhavecomeuponwhatwilllikelybeyourbestresourceforexplainingthegame'smechanismineverydaylanguage.

    Butthispageisnotsuperiortothegamemanual,availableatyour"CorporateLobby"(althoughthelookofthelobbyshiftsfromyeartoyear)undertheheadingofPlayer'sManual,whichyoushouldreadthoroughly.Atleasttwice.Ifyourinstructorgivessomefew

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    prefatoryremarksaboutthegame,listenverycarefullytoyourinstructor'sintroductiontothegame.Doit,notbecauseyoubelieveheorshehasathoroughknowledgeofthegame.HeorsheusuallydoesNOT.Infact,fewinstructorshaverarelyplayedthegamethemselvesexceptforaninitial"dabbling"whichMcGrawHillused,tosellittothem.Infact,asthegamegoeson,manyofyoumayalreadyhavefoundwhichiswhyyou'rereadingthispagethattheadvicegivenbyyourinstructorsisarecipeforcatastrophe.Instructorsareoftenasdeludedaboutthenatureofbusinessintheageofglobalization,asarethestudentslearningthegame.Thoseinstructorsmaybelievethatbycarvingthisorthatnicheout,offeringauniqueproductwithhighqualityandlowoverhead,youwillhavebuiltaaprofitableenterprise.Aswillbeexplainedbelow,a"profitableenterprise"isn'tgoingtocutitintheBSG.YouneedtohavetheMOSTprofitableenterprise.Andthat,DearReader,willcostyouanypersonalcharacteryoumayhavemanagedtoclutchonto,after4yearsinaninstitutionwhichisdedicatedtocloningcorporatevalues(youwouldn'tbeplayingthisgameifthatwereNOTtrue)inyou.Youwillneedtoatleastpretendtosurrenderintegritytowinthisgame.

    FIRSTROUND

    Onemoretime,thisdoesnotmeanthatyoushouldnotlistentoyourinstructor'sremarksbecauseyoucanbankon50%oftheotherstudentsintheroomfollowingslavishlyanyrecommendationsheorshemakes,eveninferentially,inthefollowinground.Andyoucanmakeyourmovesaccordingly.OurinstructorsuggestedraisingS/Qapoint"perhaps",loweringthepriceadollar"maybe"inRound1.Doinglittleelse.Teamsmadeslightvariationshereandthere.Ofthe6otherteamsintheroom,onlytwo(TeamAandTeamFintheexamplesbelow)madesome"radicalmove"andraisedthemodelnumbersomewhat,alongsidechangesinS/Q,andthoseteamsdidwellintheround.ButRound1is,aboveall,acrapshoot,asyouandyouropponentsfeelthegame,andoneanother,out.And,believeitornotitisaroundsomechoosetolosedeliberately,tolowerstockpricesforpurchasethefollowinground).Round1wastheonlyroundmyteam(TeamBbelow)lost(unintentionally).OurpricesandthusourprofitmarginswerecomparativelylowandwecameinfourthinEPS/ROE.Consequentlyourstockpricetanked(allowingustobuyitbackatbargainpricesthefollowinground,althoughtherearemoreprofitableapproaches),eventhoughwetookthelion'spricesinthemarket.Wetookfourth,andnotlast,place,despitekeepingourmodelnumbersataridiculouslylowlevel.Wedidn'tknowanybetteratthatpoint.

    ImportantConsiderationsBeforeYouCommencetheGame

    McGrawHill'sonlineBusinessStrategyGameisincreasinglyapartofmanybusinessandbusinessinformationcourses,worldwide.Thosewhoworkinmodernindustrieswillrecognizeitforwhatitisastrategygame,oneofseveral,suchasGloBus,allwithremarkablysimilaralgorithms.Asastrategygame,itismostexpertlyplayedbypreteenswhospecializeinstrategygameslikeWOWorStarCraft.Businessmajorswhohaveneverworkedinamoderncorporationareapttodopoorlyunlesstheyforgetmuchofwhatthey'vebeentaughtinclassandrelyupontheobservationsofteammatesatworkplacesinstead.Thosewhohaveneitherworkedforamoderncorporation,orspenttimegaming,willbeatadisadvantage.Winnerswillbethosewhofocusonthegamescores,ratherthanupon"buildingarespectablebusiness".McGrawHilldoesnotrevealthealgorithmusedtodetermineOverallScoresbutalittleanalysiswillshowtheindividualcategoriescanbedividedinto2categoriesbytheirweightintheoverallperformanceranking(seebelow).

    Thewinningstrategyforthegameisasonestudent,andaprofessionalfromalargeindustrialcorporationbasedinTexas,notedentirelysituationalitdependsuponyouropponents'movesaswellasyourown.ThemostsuccessfulcompetitoristhusactuallyplanningTWOmovesatanygiventimeyourownmove,andthatofyouropponent,and

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    devisingmethodsofinducingtheopponenttobelieveheorsheismaking"theirmove"oftheirownvolition.Forthemostpart,thelatterwilllikelybedonebyexampleifyouaresuccessful,otherswilltrytocopyyourmethods,anditbecomesessentialthentomakeitappearthattheunderlyingreasonsforyoursuccessarenotasyouknowthemtobe.Thatisnotanunrealsituationintherealbusinessworld.MOSTCEOsareincapableofdevisingoriginalstrategiesandinsteadspendalifetimetryingtoapeothersor"outape"thosewhoare.Benchmarking,it'scalledintherealbusinessworld.CorporationspayforasetofstatisticsalsosuppliedtoyouintheBSGofindustryaveragesandindustrylowsforcosts.CEOswillscanacrossthisandsetatargetbelowcompetitors'costs.Onequarter,itwillbesay,1%.Another,say3%.Infact,youcouldsitachimpatakeyboardwithnumbersonly,andimitatethemost"brilliant"ofcorporateCEOs.Theproblemwithsuchanapproachisthat,forthenationonly,itimpliesaneverdownwardspiralofwagesandbenefitsastheaveragekeepsfallinginthewakeoftenthousandsuchdecisionsbytenthousandsuchchimpanzees.Andofcourse,profitmarginskeepfallingbecauseamongthese"benchmarkstobeat"areprices.Ifyouropponentsareastute,youwillfindyourprofits/scores(andtheirs)driftingdownwardeachround.Iftheyareidiots,youwillbecomeaGlobalChampion.Sostrikeearlyandstrikehard.

    Theusualbusinessmodel,evenformanufacturingcorporations,isWalmart:makeorsellshoddygoodsatlowprices,withthelowestpossibleshareoftheprofitsmetedouttoanyonebutmanagersandstockholders.TheidealCEOtodayhasaspirationswhichdifferlittlefromthevisionsofaplantationowneroftheantebellumDeepSouthwhoreliedongangsofslavestoproduceasizableincomeforthemasterinexchangeforabowlofcornmush.Andtheendthatliesaheadforhimorherwilllikelydifferlittle.Peoplegenerallywillrecovertheirdignityandlivelihoodsbysomemeans,usuallyinfitsandstarts,sometimesincataclysm.Butinthemeantime,themasterwilllivewell,sometimesverywellindeed.That'syourgoalinthisgame.Livingwell.Andsqueezingotherssoyouandyourmajorstockholdersmaydoso.Ifyoucandosowithouthesitation,withoutthatmomentaryclutchingduetoasenseofresponsibilitytoandforoneother,youarelikelytosucceedinthecorporateworldaswellasinthisgame.Yes,you'recorrectthatIStheclinicaldefinitionofasociopath,butatthemoment,thelivelihoodsoftheentireplanetarecontrolledbyanorganizedbandofsociopaths,asisevidencedbythebehaviorofbankingofficialswhohavedonemoreharmtomillionsinthiscountrythananyterroristshavedreamedofdoing,andyetbelievewithalltheirheartsthattheyarefullyentitledtotheirmilliondollarbonuses.Andthesesociopathscontinuetowalkfree,withwadsofcashintheirpockets.They'reconsidered"normal",andinfacttheBSGholdsthemuptoyouasrolemodels.

    StrategicConsiderations

    Disguiseeverysuccessfulmovewithatleast2changes,whichwillleaveyouropponentsunsureofwhichtoemulate.UsecommonbulletinboardstoVERYSUBTLY,becausetherearethoseintelligentenoughtoguessyourgameifit'soverttolet"slip"somemishintofthisorthatplan,orslightmisexplanationofpastsuccess.Headleftbeforedoublingbacknextmovetogorightforexample,uppingS/Q(seebelow)onenotch,onemovebeforedroppingit2notchesthefollowinground.Therearemanywaystowinthisgame,andyoumustbeversatileifyouhaveableopponents.Thispage,asearlyas2009,wasdrawingsome3000hitsdaily180,000hitsamonth,andyoucanbetthatatleastoneisfromoneofyourcompetitors.Ifseveralare,yourgameisgoingtobecomeverymeanveryquicklyunlessyoumakeitseemasthoughyouarecontinuallychangingyourstrategy.Everyterm/semester,Icorrespondwithacoupleofdozenteamsplayingthisgame.Invariably,thequestionarises:whathappensif2ormoreteamsadoptthisstrategy?Theanswerisalsounchanging:thegamewillgetverygrimforyouindeed,butnotnearlyasgrimasifonlyone

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    teamadoptsit,andthatteamisn'tYOURS.

    Butneveroverestimateyouropponents:ifyouareawomanplayingmales,asknaivequestions,leadingopponentstobelieveyouareabouttodotheoppositeofwhatyouareactuallyplanning.Letthemassumeyoursubsequent"error"isbaseduponyour"naivet"or"hormones"ratherthanbeingabrilliantstrategicmove.Thesameistrueforethnicgroups,whateverthenature.ThoseofEuropeanancestryinaclassdominatedbyAsiansorHispanics,mightplaytothehilttheideaofanignorant,arrogantjackass,whichisprettymuchhowLAandAPseethem,ratherthanofonedoingpiercingandcalculatedanalysis.ThoseofAsianbackgroundmightplaytotheracismoftheirownEuroopponentsbyposingasacalculatingmachineincapableofflexibleorganizationorofchangingdirection,byinsistinginpublicforumsonthecorrectnessofaparticularlypoormovebysomeotherteam,forexample.HispanicsmightplaytotheracismofbothAsianandEuroopponentsbypretendingtobelazyandunconcernedwithoutcomeswhileshrewdlycalculatingeverypossiblemove.Olderopponentscanplaythesamegamewithyoungerones,thelatterassumingalackofcomputerandgamingskillsonthepartoftheformer.Findouttheprejudicialassumptionsheldbyyouropponentsandactverysubtlyasthoughyouaremeetingtheirexpectations.Leadthembyallusion,byseduction,orbyleavingthemonlyonechoice,upthepathtoCannae,whereyouwillplayaningenioushandandthencutout.Hideyouroccupation,ifneedbeneverletanyoneoutsideyourownteamknowthatyourlivelihood,forexample,comesfromdesigningbusinessstrategygamesforMcGrawHill.Instead,letdropahintthatyoutinkerwithtoys,withoutbeingtoospecific.If,ontheotherhand,youareaWOWchampbutapianoteacherinyoursparetime,leadyouropponentstobelievethatallyouknowand/orareconcernedwith,isChopin.NeverforgetthatBSGisastrategygame,anditisonyourstrategy,notyourbusinessskillsexceptinsofarastheyareweightedbythegameitselfwhichwillyieldyourscores.

    Therearemanywaystowinthisgame,butfollowingarethesomelessonslearnedfromourexperience,andfromthosewhohavesubsequentlysentustheirconclusions.Iftheirnamecomesup,speakwellofthem.Thefiguresusedarethosefrommyownteam'sexperience,buttheyarenotthebestseenincorrespondencewithotherstudents.ROEof35%earlyinthegamearenotuncommonandoneteamfromThailandconsistentlyhitanROEof4550%inagameof12teams.ROEintherangeof100%isnotrare.

    Thegreatestmistakeyoucanmakeinthisgameistotrytorunyourfirmasarational"business",assumingthatifyoumarketaqualityproduct,keepcostsundercontrolandshowamodestprofit,withreasonabledividendsforyourshareholders,goodwagesforyouremployees,andkeepyourcreditclean,thatyouwilldojustfine.WRONG!That'sagreatformulafora"momandpop"shop,butthefirmswhowinthisgamearethosewhohaveputthe"momandpop"shopsoutofbusiness.Theyarehugemultinationalfirmswhosestockholdersdon'tcareonewhitaboutdividends,forexampleexceptastheyincreaseROE/EPS.Multinationalfirmsintherealworldrarelypaydividendseither.Stockholdersintherealworldareinterestedonlyinthepriceofstock,stockwhichtheyholdforanaverageofonlyoneyear,andthensellforatidyprofit.Thefutureofthefirm,beyondthatoneyear,theyhavenointerestin,andtheyarepreparedtosacrificethefutureofthefirmanditsemployeesforthevalueofthestockattheendoftheyear'stime.AnyCEOwhofailstosharethatviewwillsoonbeinthesameunemploymentlineasthosewhosejobstheyhaveslashedtofattenthestockprice.Thelengthofyourgame,howevermanyrounds,shouldbeseenasequivalenttothatyearlongtermintherealworld.Ironically,losingteamswill,attheendofthegame,sniffdisappointedlyandpointproudlytotheirsqueakycleancreditrecord,orsomeother"solidbusinesspractice"whichwascentraltotheirlosingthegameasajustificationoftheirdecisions.Theywillneverunderstandthatwinningthisgamemeansconsumingeveryassetforthesakeofthecurrentsetofstockholders,andonlyforthem."Everyasset"includescredit.Onthispage,youwillfindemphasizedagainandagain:ifyou

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    playthisgameforanA+creditandamodestprofit,youWILLLOSETHISGAME.Indeclaringyourstrategytoyourprofessor,rememberthis:yourgoalshouldbereturningmaximumvaluetothestockholders(Ifthatmeansholdingabakesaleintheparkinglot,youshouldbewillingtodoso.Ifitmeansslaughteringandsellingthecarcassesofyouraccountingstaff,doso.)

    STEP1

    Gotothebsgportal(theappearancechangesfromyeartoyear).Youwillsee"CreateStudentAccount",whichyouwillneedtodothefirsttimeyougotothesite(http://www.bsgonline.com/).Fromthenon,youwillneedonlytologinwithyourusernameandpasswordatthetopofthepage.Seebelow.

    Ifyouarealreadyloggedin,theloginbuttonwillnotbevisibleandinsteadthelink,"ReturntoYourCorporateLobby"willappear(remember,theuserinterfacecanvaryfromtermtoterm).

    OnthispageyouwillfindafewinterestingitemssuchasGlobalTop25,HallofFame,etc.butforthemostpartyouwillwanttosimply"ReturntoYourCorporateLobby".

    THECORPORATELOBBY

    Onthe"corporatelobby"page(seebelow),youwillfind3areasmostimportanttoyou.Thefirstisyourmessagesanddeadlines.Thesecondisthecurrentexchangerate.Thethirdisusedcapacityforsaleafteraround.

    Thedeadlinesareselfexplanatory.Readthemsincetheyareassignedbyyourinstructor.Theusedcapacitywillnotapplytothefirstround.Itreferstodecisionsbyotherteamstoselloffcapacityatthebeginningofanewroundandthisinformationwillonlybeavailabletoyouattheendofaround,whenresultsareavailable.Youwillfinditworthyourwhiletostayupuntiltheseresultsareavailable(usuallyaftermidnight)andsnatchupallusedcapacityinLAandofteninAPsinceitishalfprice.Seebelow.Purchasedusedcapacityisavailableimmediatelyinthefollowinground.

    EXCHANGERATES

    Theexchangeratesareusefulinformation,althoughtheyrelatetogeopoliticaldevelopmentsbeyondyourcontrol.Therewasatimewhenthesefluctuationswereunpredictable,anditwastemptingtoestablishplantsinmostregionssimplyasahedgeagainstthem.Thatcanbequiteexpensive.Butcurrencyratesinthegamearebasedonrealratesintheworldmarket.BecausetheU.S.nationaldeficitcontinuedtoriseafteritbloatedtripled,actuallyundertheBushadministration(anaveragecommunity's2008shareofthatindebtednessevenin2005was$2billionforatownof50,000,moredebtthanthecountryhashithertoaccumulatedthaninitsentirehistory,andtherewereyearsofdeficitsaheadasthecountrytriedtoleverageoutofthe2ndofBush'srecessionsbyfurtherborrowing)andpersonaldebthasshotthroughtheceiling(asthecurrency'spurchasingpowerhasplunged),youcangenerallydependuponU.S.currencyhavingacumulativelossinvalueifthethelengthofyourgameissufficientlylong(individualinstructorscansetthelengthatwill).Toacertainextent,thisdebasementoftheAmericancurrencyisdependentupon

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    politicaleventsintheU.S.butRepublicanadministrationsofthepast40yearshavesuccessivelyrunuprecorddeficitsandyetkeepprintingmoneylikegrocerychaincoupons.Butwitha10trilliondollardebt,theU.S.haspassedthepointofreturnforcurrencystability.TheObamaadministrationhashaltedtheaccumulationofdebtbutfartoolateinthehistoryofthecountry'sdebttohavemuchofanimpactoncurrencyrates.

    BecausetheindependentFederalReserveBoardregulatestheamountofcashflowing,throughinterestrates,thetendencyforinflationaeuphemismforyourfallingstandardoflivingthroughthevacuumingupofyourcashforfewergoodsandservicesthroughamechanismofrisingpricestooccur,issomewhatkeptincheck.Butinaneraofstaggeringpersonal(especiallystudent)debt,currencydevaluation(anotherphraseforinflation)isinevitable.Today,aU.S.dollarisworthlessthanthepostagerequiredtomailitinanenvelopetomanycountries.SinceLyndonJohnson,Democratsontheotherhand,havetendedtoletpricesreflectanyindebtedness(inflation),andthepoliticalrepercussionshavebeenimmensewhenthesearenotreinedin.TheonetermpresidencyofJimmyCarterwastheextremeexample.Thereis,since,arecognitiononthepartofDemocratsthatpricesdirectlyaffectedbythegovernment'soutputofdebtandcurrencymustbecontrolledexceptintheeventofnationalcatastrophe.NationalcatastropheisaeuphemismforPearlHarboror8yearsofcorporateplunderunderRepublicanrule,aswasrecentlyendedin2008.Asaconsequenceboththevalueofthedollar,andinterestratestendtofluctuatelessunderDemocrats,outofselfinterest.Republicanadministrationsfunctionmorelikethe"corporateraiders"orthemutualfundswhoownyourowncompany,caringlittleaboutthelongtermaffectsastheysiphonofftheresourcesintothepocketsofcorporateraidersovertheveryshortterm.GeorgeBushwasn'tjokingwhenhetoldagatheringofbillionairesthat"somepeoplecallyoutheelitistrichIcallyoumybase".Andtheendresult,ofRepublicanfortunesfallingtothelowpointsof,say,theNixonorBushadministration,doesnotleavethemsleepless.Notonmattressesstuffedwithmillionsofdollarsdonatedbytheirmentors.TheyknowAmericansarerestless,willbecomeboredwithmundanelifeunderDemocratsandwillcomeback"formore".Thehumormagazine,theOnion,headlinedthe"election"ofRepublicanGeorgeBush:"Atlast,thislong,unbrokennationalnightmareofpeaceandprosperityhasended"Asuncomfortableasthismayleaveyou,itisessentialtoyourunderstandingofthegame:theAmericandollarwillbetrashedfarmoreseverelyunderRepublicanadministrationthanotherwise.

    TheexceptiontothefallingvalueofthedollarisinmomentsoftotalfinancialcollapseintheU.S.,whenthemultinationalsfinditnecessarytopulloverseasassetsintotheU.S.inordertopaydowndebt.ThisisapurelytemporarydevelopmentandwillbefollowedbymorelowsfortheU.S.dollarastheeconomyrecovers,evenslightly.Theselows,ofcourse,translateintoadeclininglivingstandardforAmericansingeneral,astheyareunabletopurchasethesamequantitiesofgoodsasheretofore.

    Thedollar'svalueisnowatthelowestithasbeeninnearly30years,sincetheReaganadministration.Thismeansyourpricesaregoingtobeveryvolatile:moreexpensiverawmaterials,andfinishedshoesfromLA,NA,andEAwillcostmoreintheUS.Itmeanstheprofitsofyourproductsmadeinplantsabroadwillbelower.Andinelectionyears,theycouldbeveryvolatileasthemarketsanticipateresults.

    TherelativedropoftheU.S.currency,however,willaffectonlythevalueofthedollarversustheJapaneseyen/Singaporedollar/Chineseyuanandtheeuro.ThevalueofthedollarrelativetotheBrazilianrealdependsalmostentirelyuponeventsinBrazil,whichareincreasinglylesspromisingthan,say,adecadeago.Thedevelopmentofcivilwarbetween

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    thegangs,whodominatetheincreasinglydesperatefavelas(slums),andthearmy,seriouslydisturbstherealwhenmajoroutbreakswhichattimesareonthebrinkoflargescalewarfareoccur.ThisfluctuationinBraziliancurrency,uponwhichalltradewithLAinthegameisbased,isastrongargument(alongsidelowerwagespaidtoLatinoworkerscomparedtotheU.S.orEuropebymultinationalfirms),forplanningafactoryinLAwithacapacity,eventually,ofatleast3000.ThecurrentpartyinBrazilistryingtoremedythesituationsinthefavelas,andthereiscurrentlyanexpansionoftheBrazilianeconomy.Itwouldbedifficulttopredicttheeffectofthisoncurrencyexchangerates.

    Donot,then,buildsmallerplantsineveryregiononthepremisethatwidecurrencyfluctuationswilljustifytheinvestment.FocusonlargeplantsinAP/LAandavoidbuildingintheU.S./EA.Infact,youshouldnotbuildsmallerplantsinANYregion.Anyteamwithadreamofbuildingasmallcustomplantturningoutcustomized"nicheshoes",ofverygoodquality,say,willbeveryquicklydisabusedoftheworkabilityofsuchascheme.Thegame,asdoescorporatereality,shutsoutsmalleroperationswhichdonotfocusonproducinglowqualitygoodsatverylargefacilitiesi.e.,atthelowestpossiblefixedcostpershoe.Ifyoucan'taffordtobuildthesemegafacilities,youcan'taffordtobeintheshoebusiness.Soborrow,borrowborrow(seebelow),oryourfirmwillsurelydie.

    Thisis,ofcourse,areflectionoftheBSG'sobsolescence.Intherealbusinessworldtoday,thecostsofmaintainingplantcapacity,after40yearsofcorporationsusing"Benchmarks"toshedcosts(andprofitmargins,incidentally),havecometobecompletelyavoidedbyoutsourcingproductiontoothers.AdidasandNikescanbemadeatthesamemanufacturingplantinAsiaorevenintheCzechRepublic.Factoriesarenotownedbythecorporationsidentifiedwithaproduct.Ifmoreproductionisneeded,alargerorderissimplyplaced.Thisisanotherpartofthegamewhichisafossilfromanearliereraofdoingbusiness.Today,afarsightedlargecorporationwhichhasseenprofitsslide,doesnotfocusonlyoncuttingcostsandwatchingothersapethem,withsubsequentfallsinprofit.Suchafirmwillinsteadexpand(usuallyvertically,tobuy,forexample,afirmspecializingindyesforshoessubsequentmergingofmarketing,maintenance,informationetc.allowingslighteconomiesofscale.Moreimportantly,theycreateanewssplashwhichbooststhepriceofstockslightly.Shareholdersthusseeaslightincreaseintheirprofitwhensellingthestock,anditreallydoesn'tmatterifthefutureofthefirmisrelinquishedbythesizeofthenewdebttakenontobuythefirm.Onlytheshorttermtheperiodbetweenstockpurchaseandsalematters.)

    DECISIONENTRIES

    Afterlogginginandchoosing"ClickHereToEnterY...Decisions",youwillbetakentothesecondaryportalwhereyouwillchoosetheDecisionEntriesPage.

    ThispageisactuallytheRESULTofyourmostimportantdecisions.Itisnottheplacetoenterthem.First,goinsteadtotheFinanceandcashflowpage(youcangetthereusingthetabatlowerleftonyourBrandedSalesForecastpage).

    THEFINANCEANDCASHFLOWPAGE:BORROWING,STOCKDIVIDENDS

    Thisiswhereyouwillborrowmoney.Inthefirstfewrounds,youwillborrowthemaximuminlongterm(10year)loans(usually$250million).Don'tallowyourfiscalconservatismtogetinthewayofyourwinningthegame.Byfocusingonthosescoreswhicharemostimportant,youwillinevitablyyieldgroundoncreditratinginallbutthelateroundstothoseneophyteswhoarefocusedonperformingtheirroleasconservativefinancialofficers(CFOs),tothedetrimentoftheirteam'soverallperformance.Mostinstructorsmakeuseofabulletinboard

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    whichyouwillfindworthsnickeringoverattheendofthegame,withlosingteamscongratulatingthemselvesonmaintainingtheirsuperiorcreditratingaswellasadozenotherdeficienciesintheirgame.Borrowingheavilyisessentialtothewinningofthisgame.YouwillNOTwinthisgameifyouyourgoalisanA+creditrating.YouSHOULDtrytoneverplanforaroundwithacreditratinglessthanB+,althoughyoumayfindthat,inthegameitself,yourcreditmayfalleventoConanoccasion.Youwillnotbefocusinguponrationalinvestmentdecisionsbutuponpredatoryones.Sleazebagshouldbecomeyourmiddlenameforthedurationofthegame.Saveyourmoraloutrageandfiscalresponsibilityforthedaywhenyouaredonewithyoursillydegreeandcanmakeyouroutrageknownelsewhere,inthestreets,inthewayyouliveyourlife.

    Inearlyrounds,youwillbeborrowingtoexpandcapacityandupgradeequipment,aswellastobuystockback.Inroundone,youshouldtrytoexpandyourstartingcapacityinAP,andexpandthemaximumallowedforanewplantinLA(usually2000capacity,sometimes1000).Sincenewplantcapacityfor1000isgenerallyintherangeof35million,youwillbeabletostartanewplantinLAandusetheremaindertoincreasethesizeofyourAPplantaswellasupgradeforsetupsandbuybacksomestock.Yoursuccessdependsuponyourproductioncapacity.Letmerepeatthat,sinceit'ssoimportantinthegame:yoursuccessdependsuponyourproductioncapacitywithoneproviso,addedbyastudent/seniormanagerinTexas:productioncapacityneedstobehingedon"economyofscale":byincreasingyourcapacityinspecificenvironments,younotonlyincreasetheabilitytosatisfyanymarketdemand,butalsolowerthecostofyourshoes,sincefixedcostsarespreadovereverlargernumbersofshoes.Thus,asingleplantof8,000inoneregionisvastlysuperiortoplantsof2500ineachof4regions,despitetheseeminginferiorityinnumbers.Eachplantoperatesindependently.Thatis,your4plantsdonotoperateasasingle10,000unitplant,andfixedcostsarespreadonlyoverthenumberofshoesproducedinaregion.Tounderstandtheroleoffixedcosts,imaginethatthecostofmaintaining,ataplantoffixeddimensions,atemperatureof68degreesis$1000,spreadoutover100shoes.Thepriceofeachshoemustbethensaddledwithanaverageof$10forheatingcosts.If,instead,thesameplantproduces10,000shoes,eachshoemustbearacostofonedimeforheating.Thelatterplant'sshoecosts,andthusprices,willreflectcostsnearly$10lessthantheformer.Thesameistrueoflandscaping,roadmaintenance,powerlines,keepingaCEOinthestyletowhichheorshehasbecomeaccustomed,etc.

    Inround1,yourcreditratingisasgoodasitwilleverbeinthegame.Youwillwanttoborrowextensivelytotakeadvantageofthisrelativelylowinterestrate.Useonlylongterm(10year)loanswhenpossible.Butborrow.Extensively.Eachround.Therewillbethosebusinessmajorswhohaveneverworkedinthecorporateworldwhoarguethatthisrepeatedborrowingsaddlesthecompanywithlongtermdebtswhichwillultimatelydoomittoextinction.They'reright.Whocares?Yourgame,andthusyourfirmhasalimitedlifeanyway.Pillagingit,isyourkeytosuccess.Whenyouwalkaway,asthestockholdersinthefinancialsectorhavedoneundertheBushadministration,youwilllookoveryourshoulderandseewhattheydoacarcasswherethefirmoncestood.

    Andthisisreality,inasense.IntheAmericanbusinessworldtoday,companyownersarenolongerthecompanyownersofyourgrandmother'sday.Theydonotgiveahangaboutthelongtermviabilityofthecompany.TheycareonlyaboutthestockpricenextThursdaysotheycansellitonFriday.IfthecompanycollapsesonSaturday,throwingeveryoneelseoutofwork,andallthesmaller,orlatepurchasing,stockholdersintobankruptcycourt,today's"owners"willyetsleepwell.Legally,acorporatedominatedSupremeCourthastwicedeclaredthatcorporationsare"individualhumanbeings"andhaveallthe"rights"thatpeopledo,withtheownershavingnoresponsibilityfortheirdeedsoftheircreation,orforitsemployees'(CEOs')malfeasance.Theirony,ofcourse,isthatmanyoftheselargestockholdersaregenerallymutualfundswhosecapitalisbeingprovidedbythepensionfundsof

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    theveryworkerstobetossedoutoftheirjobsnextweek.They,andweasanation,arethuscommittingcollectivesuicidebysquirreling401Kfundsintotheseinstitutions,butthat'stherealityofthingstoday.UndertheBushadministration,corporationshadunchallengedrule,andasaconsequenceof8yearsofsucharegime,themostbasicofhumanneedshousing,foodandfuelarenowinjeopardyforthecountry.Wehavebeenusedupandsqueezeddry.WemakenothingintheU.S.anymoreandwehavenomoneylefttosiphonofftothelikesofHalliburton,MonsantoorWachovia.Asaconsequence,itisthewealthoffuturegenerationsdebt,whetherprivateorpublicthattheyarelefttofocusupon.

    Besidesmutualfunds,theothermajorplayersintheworldtodayarepooledfundsunderthetutelageofasinglepersonalitysuchasWarrenBuffet,andtheyalsohavelittleconcernforthefutureofthecompaniestheydivestthemselvesof,aftertakingaprofitonthepriceofstockoneofthemoreimportantscoresinthegame.That'sreality,andthat'sreflectedinthegametosomeextent.Buffethimselfseemstobeaverydecentperson,buthe'sworkingagamewhichisnothonest.Andhe'sworkingitverywellindeed.Itis,afterall,currentlytheonlygameintownforhimtoplay.

    Somestudentsobjecttotherealityof"banks"extendingloanstocompaniesexpandingrapidlyinamarketwherecapacitycanoftengreatlyexceeddemand,asitusuallywill.Thatisoflittleconcerntoyou,andthefactofthematteristhatalargecorporationwillalwaysfindwaysofraisingmoneyfromunwittingshillswhenneeded.Itmaybefromissuingvarioussortsofquestionablenotesbackedbylittlemorethanthe"vision"spewingfromapowerdrunkenCEO,orgovernmentbailouts,butitwillcomefromsomewhere.Itmaybefromfraud,orfromfromlegislationpassedby"friendly"(corrupt)legislators,granting"taxbreaks".Forexample,hereinOregon,Abillpassedbythelegislature,ostensiblyintendedtofundwindenergy,allowedWalmarttobuy$40millionintaxcreditswhichallowedthecorporationtoevade$90millionintaxes,givingthema$50millionwindfalltouseforequallyprofitableinvestments.SimilarfundingmaycomefromboostingATMfeesoroffshorebankingschemes(Googleforexample,shipsitsprofitsthroughIrelandtoBermudawithataxrateofamere2%.That'scalled"moneylaunderingwhengangstersdoit.Whencorporationsdoit,it'scalled"offshoring".).Infact,ifthebankingpoliciespermittedbytheBushadministrationprovednothingelse,theyprovedthatbanksarejustasliabletosacrificethelongtermviabilityofafirmforprofitsandstockpricesrisingoveraveryshortterm.Likeothercorporationstheyareresponsibleonlytothecurrentcropofshareholders.

    Asaconsequence,themoneywillcomefromsomewhere,foraperiodoftime,andcoincidentallythisgamehasafiniteperiodofplay.Inthegame,allsuchsourcesarecollectivelylabeled"thebank".Andtheworstpunishmenttobeincurredforlargedebtshortofbankruptcyisincrementalinterestrises,whichhopefullywillbringthecompanytoitswelldeserveddeaththeweekafteryourgameendswithyourwin.Meantime,borrow.Borrow.Borrow.

    Again:inthefirstround,youwillwanttogreatlyincreasecapacityinAPifyoupossiblycan.StayoutofEA.Oncemore:STAYOUTOFEA.YouwillalsowanttoborrowtoinvestforthemaximumcapacityallowedinLA,whichinourgamewas1000initially,butwhichcanbeincreasedbyyourprofessor.Ifyoursisa1000limit,thenthefollowinground,theshoesinLAwillbeveryexpensive,asthefixedcostsoftheplantwillbespreadoverasmallnumberofproducts,andprofitmarginswillbethinifyoukeepthepricescompetitive.However,insubsequentrounds,asothersfollowyouintoLAandsomewillfollowyou(thesheepinstinct,again)youwillhaveafullplantinoperationasthey,inturn,openalimitedfacilityandyouwilltrouncethemintheregion.Thecurrencyfluctuations,andaccompanying

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    exchangerates,inLA,canbesovolatilethatthepresenceofalargeplantintheregionisessential.Andwagesaresooppressivelycheap,andworkingconditionsandenvironmentallawssoweakandpathetic,thatanLAplantisimmeasurablycheapertooperate.Insubsequentrounds,youarepermittedtoexpandonlyby50%afigurewhichcanbeadjustedbythepowersthatbe)soRound2,youwilladd50%totheLAregion,andinRound3,50%again(50%of1000+500inourgame).Atthatpointyourplantisfullyoperational,thoughfurtherexpansionisdesirableatleastto3000.InAPandsubsequentlyinLAtooyoumaywanttoexpandcapacityineveryregionby1000eachroundinthebeginning,ifyoucan,afterincreasingAPcapacityinthefirstround.AlwayspickupusedAP/LAcapacityothersofferforsale.FromthecalculationsofastudentinBangkok,theidealyouareshootingforearlyistohaveatleasttwicetheaveragemarketshareaverageforateambytheendofthegame,andtwicethecapacityofyournearestcompetitorineachregionpreferablyfromthefirstroundforward.Forexample,if6teamsareplaying,thenyouwouldexpectanaverageteamtohave16.7%averagemarketshare.Youareshootingforcapacitywhichwouldallowyoutohave33%then,ifyouchosetoputitallinthebrandedmarket.Alternatively,if10teamsareplaying,eachshouldaverage10%ofthemarket,andyouareshootingfor20%.Projectedmarketdemandsforfutureyears(whichcanbevariedbyindividualinstructors)willprovideyouwiththecapacitynumbersneededtogiveyouthesenumbers.Alwaysplanforaslightlygreatercapacitythanthesenumbersindicate,sinceactualmarketdemand(whichappearstobedeterminedbyaprobabilityalgorithmbuiltintothegame)willattimesexceedprojections.Butplantheseincreases"reasonably",althoughyoucanalwayssellcapacityasyouwillyourNAplantinaglut.

    Axiom:Yoursuccessinthegamewillbedirectlylinkedtoyourpracticeofeconomyofscaleandyourbreadthofline(modelnumber:seebelow)aswellaslimitedstockownership.

    REPEATTHAT:youwillwinonlyifyouhavealargerplantthanyouropponentinaregion,haveasmanyormoremodelnumbers,andnomoreorfeweroutstandingsharesofstockthanyouropponent.

    Sayitagain.

    Again:inthefirstround,youwillwanttoincreasecapacityinAPifyoupossiblycan.StayoutofEAasaproductionsource(althoughtheEAmarketislucrative).Oncemore:STAYOUTOFEAasamanufacturingsource.ASouthAfricanstudentpointedoutthatthegameisEurocentricinthisrespect.ThewagesinBurundi,forexample,havelittletodowiththewagesinBritain,yettheEAfactoriesareorientedtowardthelatter.ArgumentsthatAfricaistoosmalltomerititsownregionarefacetious.Thereare1billionAfricans,whichdwarfsNAinsize.AsimilarcontradictionexistsinAP.JapaneseworkersearnwagesfarhigherthantheMalaysianorVietnameseworkersthegameenvisions(Infact,JapaneseautoworkersmakeadollaranhourmorethanAmericanautoworkers.It'sinthebenefitpackageonlythatJapaneseautomanufacturershavelowercoststhaninNA,becauseofNationalHealthInsuranceandthelike,whichpushapartofthecostsontothepublicasawholeratherthanontothecorporation).

    BigDeal:thegameissimplyracistandethnocentric.Livewithit.ItwasdesignedinAlabama.Youwereexpectingsomethingelse?

    Thiscapacityexpansionmaywellcometoahaltwithaninstructor'sinterventionatsomepoint,onoccasionwithaninstructorabsolutelyforbiddingfurtherexpansion,andforothers,withprofessorialpenaltiesforexcesscapacity.Morefrequently,aninstructorintervenesby

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    increasingmarketsizewhichwilleffectivelyshrinkyourmarketshare.Sincemarketshareishalfthedeterminingfactorinimage,italsoaffectsyourimagerating.Soexpandrapidlyearlyon.

    Marketshareinearlystagesofthegameisaliabilityasmuchasanassetifyousetyourpriceslow.Ifyouselleveryshoeyouhave,ataprofitof,say$7,andyournextbestopponenthasa"deal"forthepublicatadollarhigher,ataprofitof$8,andyoucanonlyproduceenoughshoestomeethalfthedemand,theotherhalfwillfalltoyourcompetitorbydefault.Eachofyouwillhavehalfofthemarket,withtheirhalfyieldinghigherprofits.Theywillwineveryroundplayedinsuchafashion.Inreality,therearemoreteamsandmorefactorsinvolved,butyougetmydrift.YourROEandEPSwilldriftlower,andyourstockpricewillsufferthroughoutthegameunlessyoucanbegintomeetdemandforyourshoes.Andbecauseyouaren'tabletodeliver,thenumberofretailerswillingtohandleyourproductsnextroundwillshrinkthenumberofretailersisnotamajorfactor,butafactornonetheless.

    Inborrowinginround1(andeveryroundthereafter),youwillwanttocompareyourcurrentinterestratewiththatontheoutstandingloansassignedyourcompanyatthebeginningofthegame.Youmayfinditcheapertorefinancecalled"EarlyRepaymentofLoan"onthefinancepage)theoutstandingpartofthoseloansalongsidenewloansforexpansionandinRound1youwillwanttoborrowprimarilyforrapidexpansionandbuyingstockback.If,forexample,yourcompanyhasbeenassignedanoutstandingprinciplewhichis30%ofthemaximumallowedforlongtermloans,atahigherinterestratethanonalongtermloanyoucancurrentlytakeout,youwillnotwanttoborrowthatamountonly,topaydowntheloanatalowerinterestrate.YouwillwanttoborrowthemaximumallowedinlongtermloansanduseittoincreaseyourAPproductioncapacitybyatleast25%ifatallpossible.YourstockpriceisatapremiumontheeveRound1too,andyoumaynotwanttowinthisroundinalargeway.Infact,youmaywanttoloseit,sothatyourstockpricetanksandyoucanusethe2ndroundtobuyitbackmuchmorecheaply(seebelow).BorrowthemaximuminlongtermloanstostartaplantinLA,andtoincreaseyourcapacityinAPinRound1,anddothesetupupgradeintheAP.InRound1,wemadethemistakeofborrowingearlyontoinvestinvariousplantupgradesalongsideexpandingcapacity,ratherthanfocusingonlyonthelatter.Youcandotheupgradesinlaterrounds,whichisabetteridea.

    Theexceptionistheproductionsetupupgrade.Asplantsandmodelnumbersexpand,thisupgradebecomesprohibitivelyexpensive,andyetthesavingsbecomeevermoreimmense.Dothisupgradeasrapidlyaspossible(seeplantcapacitybelow).Byinvestinginitwhileplantsaresmall,thebenefitisinheritedasplantsgrowandcostoftheupgradeisnothingadditional.

    StockDividends:Thegamedoesnottrackthesizeofthedividends(exceptaspartofEPS/ROEandequity),onlywhetheritincreasesordecreases.Setthestockdividendlowatthispoint.Weputitat$.05annuallyandaddedapennyeveryyearsothatattheendofthe6thround,wewereshellingoutadime.Thatgaveusascore(+/)of5/1inraising/loweringthedividends.Otherteamswhichtriedtoimpressthe"investors"werepayingout$12inRound1butnecessarilydroppingthemeveryroundfollowingforascoreof1/5,orroughly25timeslowerthanours.TheincreasedROEyoupostwillmorethancompensateforthesmallsizeofthedividend.However,it'simportanttorememberthatlowerdividendsmeanthatprofitsarebeingplowedbackintothebusiness,whichmeanshigherequityforthefirm,andthisequityisadenominatorinoneofthefinancialscores(netprofitdividedbyequity).Ifyouhaveinvestedheavilybutstillhaveatonofcashlayingaroundandexpecttodosofor

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    futurerounds,increaseyourdividendpayments.Otherwise,simplyincreasethemeachroundbyaminimalamount,inourcaseapenny.

    EXCEPTION:Thelastround,bywhichtimeyoushouldhaveyourearlyloanslargelypaidoff,youcanborrowthemaximumallowedyouin10andeven5yearloansprovidedyourcreditdoesn'tfallbelowaB+asaresultandhanditouttostockholders.ItwillgreatlyincreaseyourROEandswingaclosegameyourway.Ofcourse,thiswillleavefuturestockholders/generationswithastaggeringdebtthatwillsurelydragthecompanytoitsdeath.Meantime,thestockwillsurge,andtheCURRENTstockholderswillrewardYOUwithyourbonusandbothyouandtheycanwalkawaybeforethepyramidschemecrumbles.That'showbusinessisdonethesedays.Ifyou'veanydoubts,youcanexaminethehistoryofthemortgagecompaniesrecently.

    StockBuybacks

    Ifyourstockpricetanksafterthefirstroundyouareinluck,ifyouaresmartandmakearrangementstobuystockback.Weinplanningthefollowingroundscouldborrowenoughtobuybackallthestocksharespermitted(2,500,000of10,000,000shares)in2roundsandtherestofthegameweweredividingby3(theremaining7,500,000shares)whileothersweredividingby4(theoriginal10millionshares)inROE/EPScalculationsgivingthemanautomatic33.3%disadvantageinscoringuntil2otherteams"caughton"lateinthegameanddidlikewise.3of7teamsactuallysoldshares,increasingthenumberby20%andfurtherdisadvantagingthem.Thus(seebelow),itmaybetoyouradvantagetoensurethatyourstockDOEStankinround1.HoweveritisNEVERtoolatetobuystockback.If,lateinthegame,yourstockhasrisensignificantlyinprice,andyoucan'taffordtobuybackallofitinacoupleofrounds,rememberthatthebulkofacompany'sequityisinthestockvalue.Buyingupevenafewhundredsharesatveryhighpricesreducestheequityconsiderable.ROEisreturn/equity.DecreasingthesizeofthedenominatorincreasesROE.ThesameistrueofEPS=Earnings/numberofshares.DecreasingthedenominatoralsoincreasesEPS.IhaveseenlatebuyoutofexpensivestockresultinROEofhundredsofpercent.BUTNEVERSELLSHARES.Toidiots,sellingshareslookslikefreemoney.Butyoudon'tneedto"dothemath"toseeit'samistake.Thegamewilldothemathforyou.YouneedonlytobeABLEtodoit,toseetheerrorinsuchamove.

    PLANTCAPACITY

    Havingsetyourstockdividendandarrangedyourloansasmentionedabove,gotothePlantCapacitytab:

    Useyourmoneytoincreaseyourcapacitydramaticallyanddothe"facilitiesupgradetoreduceproductionrunsetupby50%"onlyontheAPlineinRound1,insofarasyoucanwiththemoneyavailabletoyou.OncetheLAlineisupafterthe2ndor3rdroundthen.,

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    dependinguponthesizeofthemarket(whichisafunctionofthenumberofteamsinagame),youlikelywillsellofftheNAplant.That,ofcourse,entailscatastropheforallthoseworkingattheplant,butthegameisdesignedtoimmunizeyouagainstanyfeelingsofremorseorempathy.Whenyougotoworkforglobalcorporations,youwillneedthatimmunity.Youwillnotbeusingsuchverbosephrasessuchas"sellingoffcapacity"insteadyouwillbeusingacronymsdesignedtoevenfurtherremoveyoufromrealities."WestrovetoreduceXPCandDGRby80%butweonlymanaged65%"orsomesuch,whichistranslatedfrom"managementspeak"intoPlainEnglishas"wefailedtointroducethemiseryandhardshipweplannedinto12,000ofthe35,000householdswehadplannedto"(impliedis:"butwewillmakethemsufferthenextquarterinstead").

    Whenyou'vefinishedenteringthesedecisions,moveontotheBrandedProductionpage.

    PercentageofSuperiorMaterials:

    Ostensibly,thecostofsuperiormaterialsissetbyworldcommodityprices,buttheexactnatureandsourceofthesepricesinthegameisasecretknownonlytoMcGrawHill.Wecouldneverfigureouttheexactalgorithmalthoughsupplyanddemandamongtheteamsinvolvedinyourclassisahugefactor.Leatherisinvolved,asyoucanseebytrackingtheweeklycostincommoditymarketsandlookingatthegame'sprices.Barringsomedisastersuchasmadcowdiseaseorahoofandmouthoutbreakresultinginthemassslaughterofthousandsofcows,thesecostswillfluctuateslightlyfromweektoweek(duetosupply/demandfluctuations)forplantsoutsidetheU.S.,solongastheyarebuyingU.S.beef(beefproductionisincreasingworldwide)andtheAmericandollar'sdebasementcontinuesunchecked.Thiswillbeoffsetsomewhatbytheincreasing"cultivation"ofcattleintoChina(AP)andtheincreasingwillingnessofIndia(AP)tosendcowstoslaughterinspiteofreligiousimpulses(thehypocritically"devout"uppercasteHindussimplyoutsourcethe"taboo"jobtoothers).Butthatoffsettingisalllikelytounravelascattlefeedcorn,primarilygoestobiofuel.Itmayevenbeundonecompletelybythetrend.LAhasalwaysbeenalargecattleproducingregionandtheongoingrazingoftherainforestbycattlebaronsonlypromisesmoreofthesame.Yet,heretoo,thebiofueldemandbyoilcompaniesisthreateningcattleproduction.Regardless,thepriceswillrisediscerniblyoverthecourseofthegameasteamsincreasetheirS/Q(andmanywill),providedaworldwideeconomicrecessiondoesnottakeplace,asinevitablywilloccur.That'fluctuationwillespeciallybetrueascapacityexpandsamongyourcompetitors.Yeteachregionwillneedtobeconsideredseparately.Insomeregions,youwillfindthepercentageofrawmaterialsaremosteffectivelysetashighas35%,onoccasioneven50%,butasageneralrule,10%20%isadequateforanS/Qof,say,5,dependinguponthechoicesyoumakeelsewhere.Onoccasion,6%willbesufficientandeven0forverylowS/Q.Needlesstosay,theshoddierandcheaperthematerialsyoucangetawaywith,thebetterforyourpricesandprofits.Neverthinktwiceaboutthefactthatyourshoeswillfallapartonfirstwearing.That'snotareallifebusinessdecision,anditdoesn'tfactorintothegameeither.Thereisnoscoreforthesustainabilityoftheplanetinvolvedinmakingfewershoesofgreaterlongevity.TheCorporateResponsibilityscoresarewindowdressing.Thesocalledgreendecisionspagehasnoimpactonyourscorewiththeexceptionofconservingelectricity(seebelow).

    Generally,then,afigureof1218%isused.ItshouldNEVERexceed20%exceptinexceptionalcases.

    Findingthispageuseful?Donateafewbuckstokeeptheservergoing

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    EnhancedStyling:

    Theimpactofenhancedstylingoneachofthe4marketregionsvaries.Inround1,youwillwanttoexperimentwithvaryingtheenhancedstyling/features,percentageofsuperiormaterials,thechangeinannualbasewages,andincentivepaytoseewhichsetoffiguresresultsinthelowestpossibleTotalCostofManufacturesShoesatthebottomofthepage.Thesepercentageswillnotonlyvaryfromregiontoregion,butfromroundtoround.Insomeregions,enhancedstylingwillbemosteffectiveat0,andinothers,from10to15,dependinguponyourchoicesfortheothervariables.Initially,itwilllikelytakeyouanhour,atleast,totrythevariouspermutationspossibleineachregion,butasthegameprogresses,youillfindittakesnomorethanafewminutes.Thisgamewilloftenbedecideduponpenniessoinitiallyputthebulkofyourtimehere.Bychangingthevariouscombinations,youwillfindtheTotalManufacturingCostofBrandedShoesatthebottomofthepageshifts.Getthisfiguredownaslowaspossible.Andrememberthatintheageofglobalization,shoddygoodsarenotaliability.I'vecorrespondedwithteamswhosemembersinsisttheydon'twanttheirnamesassociatedwithlowqualityproducts.Ifyoufeelthatwaytoo,thenpleaseanswermethis:"where,peuttre,areyouplanningtoworkaftergraduation?Qualitytodayisnothingmorethanamarketingslogan.Itdoesn'texistinthecorporateworld.Youdon'tbelonginshoemanufacturing.Insteadofbeingenrolledinthisinstitution,youshouldbeworkingwithanorganicgardenerorahandcrafttoymaker.Youwouldfindmoresatisfactionandfeelbetteraboutyourwork.Andyou'llcomeclosetobeingstarvedtodeath.Thereareseverenegativeconsequencesforqualityandintegrityintoday'smarketplace.

    TQM/SixSigma,BestPracticesTraininginRound1:

    SpendingthemaximumonTQMandespeciallyBestPracticesisa"must".Thesearecumulativeinvestmentsandbytheendofthegame,BestPracticesinvestmentswillbesaving$12apair.ThemaximumonTQMisusually$2.50.$5,000isusuallyasgoodasyoucandowithBestPractices.KeepspendingthemaximumonBestPracticesuntilthefinalrounds,whenthecumulativevalueforthenonexistentfutureisofnopurpose.InRound1,itwillappearasthoughtheyaresimplyincreasingyourcosts.Theyare,buttheyareaninvestmentinthefuturewhichisjustifiedbythereturnsdowntheroad.Ifyouhavetosacrificeoneortheother,lowerTQM.

    Thisis,bytheway,themostunrealisticpartofthegame.TQMcircleswerea"buzzword"intheNinetieswhenthegamecameofage.ThesuccessofTQMdependsuponaneducatedworkforcecapableofanalyzingproductioncostsandfailuresstatistically,andalsoupontherebeingnolessexpensivemeansofcuttingcosts.TheAmericanworkforceisfrombeingtrainedbyemployerstobemathematicallyliterateanddependsentirelyuponmanagementproducedstatisticalanalysis.RatherthandevotetheconsiderablelaborcostsinholdingregularmeetingstotrainemployeestoanalyzetheseresultsviaTQM,itisfarlesscostlytosimplyimplementanychangesbyfiat.ThegaininworkermoraleviaTQMtoutedbythemethod'sproponentsiseasilyoffsetbyhiringimmigrantsorrecentcollegegradsdesperateforworkatevenminimalwages,workingthemtodeathandthenriddingoneselfofthemwhentheyareburnedout.Andthequalityoflifeofotherhumanbeings,ontheprioritylistofCEOs,ranksaboutthesameastheideaofpersonallyrecyclingcoffeegroundsintheflowerpotsonthewalkwaystotheirsuites.Theyaredevoidofempathy,andthegameisdesignedtoridyouofyours,asisthecurriculumyou'refollowingorelseyouwouldn'tbeplayingthisgame.YoucouldtaketheheartofmostCEOs(anduniversityprofessorsandpresidentsforthatmatter)andstickitinthebellybuttonofanantandstillhaveampleroomforhisorherbrain.Ifyougettothisstagetoo,congratulationsyou'veshakenyourstatusasmeresociopath.Theinabilitytofeelempathyistheclinicaldefinitionofthemuchmoreseriouspsychopath.

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    Butthisaspectofthegameisrealisticinthatitshowsthatthefocusofacompany'sfinancialinvestmentinbetterproductionisalwaysintermsofoverhypedprocess,ratherthanfocusingontheactualjobsatisfactionofemployees.CollegebusinessclassescontinuetopretendasthoughQualityCirclesorevenanemphasisonqualityarearealityinAmericanbusinesslife.Theyarenot.You'dfinditdifficulttofindasinglefirmwith"TotalQuality"circlesthesedays.Getcostsdown,gettheshoddiestpossibleproductsoutthedoor.It'saWalmartera:move'emin,slop'emdown,move'emout.Butthecollegebiasinthegamewillbeaccommodatedbytheastuteplayer.SospendsomeonTQMandsquanderthemaximumononBestPractices(say,$5000).Itfitsthegame'sdesign.

    Wages

    Asthemanualpointsout,currentstandardsoflivinginAPandLAareonly20%ofthoseinNAandAP,andthecorporationsinvolvedabroadwilldowhateverisnecessarycoupd'etats,faked"elections"boughtandpaidfor,etc.tokeepthoseratios.ThecurrentdestructionrampantinHaiti,forexample,beganasasimpleattempttoraisewagesatabaseballfactory.Thesuccessiveattemptstoisolatetheregimefavoringsuchattempts,andthesuccessivecoupsandcountercoups,havecombinedwithanearthquaketobringthecountrytoruin.Andbecauseofit,wagesatthebaseballfactoryarelowerthaneverbefore.AndtheironyofitallisthatAmericanswhoseownbaseballfactorieshaveclosedinthefaceoftheselowwages,wereprobablythefirsttosignupforthearmyandjoinintheinitialoccupationofthecountry.Andjoyfully.Howeveryoufeelaboutitasanethicalorselfpreservationissue,youhavetoadmitit'sastrokeofbrillianceonthepartofUScorporationstohaveeffectedsucharemarkablescenario.SimilarscriptshaveplayedthemselvesoutintheUSoverCuba,Venezuela,andelsewhere.Atthemoment,forexample,theChinesegovernmenthasinstitutedaseriesoflaborreformstopermitmigrantworkersatAmericanfactoriesinChinatoseebetterwagesandworkingconditions.Americancorporationsissuedaseriesofthreatsthatledtotheguttingofapartofthesereforms.AndthosesameAmericanworkerswhosejobsarebeingexportedabroadbecauseofsubstandardwages,workingconditionsandenvironmental/healthregulations,wouldbeshovingtobefirstinlinetomanthewarshipsdockingatChineseportsinavainattempttoenforceAmericansuperpower.Athirdofthepopulationwouldbedrivingaround,encouragingthesechumpswith"VetsareHeroes"bumperstickers.Childlaborethicsbedamned.Quaintsustainabilityissuesbedamned.Thelongtermconsequences,creatingadeepandabidingresentmentoftheU.S.aroundtheworldculminatingindevelopmentslike"9/11",isofnomoreconcerntoyouinthisgamethanitistothe"owners"ofsimilarcompaniesintherealworld.NoCEOsorBoardMembersdiedinNewYork.Onlypeoplewho"don'tmatter".Peoplelikeyou.

    Theeffectivenessofraisingwageswillvaryradicallyfromregiontoregion,andwillshiftfromroundtoround,dependinguponsuchseeminglyunrelatedfactorsascapacityormodelnumbers.Itwillusuallybelessthan5%andmaybezeroincases.Incentivepayfollowsthesameruleofthumb,with.20.40usuallyyieldingthelowestcostforshoes.Playwithasmanypermutationsaspossibleamongthese2,andwithmaterialsandstylingtoachievethelowestpossiblecostperpairatthebottomofthepage.Remembertokeeptheglobal

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    politicaleconomyinmind.Thegamequiteopenlyputsmoreemphasisonpieceworkameansforcorporationstoeffectivelycircumventminimumwagelawsandthustodepresstheincomeofemployees.Thatmeansbiggerprofits.APislargelydrawingfromruralreservesoflabor,andinsomeplaces,forexampleinChina,thesereservesarenearlyabsorbedintothemanufacturingeconomy.McGrawHill'salgorithmsonlaborineachofthe4regionsissecret,butisevidentlytiedtocurrentrealconditionsinthe"labormarket"(humanexistencebeingthecommodityfor"sale"insuch"markets").IfAPcomestotheendoftheircheaprurallaborreservesasispredictedinChina,forexample,by2015atthelatestyouwillfindradicallydifferentconditionsthanthoseprevailinglastweek,andthelaboralgorithmswillnodoubtreflectthattighteninginthegameintheinterveningyears.

    S/Q

    Asyoumanipulatetheabovefactors,youwillseetheS/Qchangeonyourpage.YoushoulddetermineinadvancewhatS/Qyouwanttohavebeforeyouevenbeginplayingwiththesenumbers.Asageneralrule,anS/Qof5ismorethanadequate,andlowerwillusuallyprovemoreprofitablealthoughIwouldrecommendnotgoingbelowa3unlessthecompetitiongetsfierce.It'srisky.Globalchampionshipteamsoftengoaslowas0.Butoneshouldcertainlynotgothereimmediately.Thestrategicadvantageofdisguisingintentionsisalwaysimmense.S/Qisactuallygivenamisleadingprominenceonthegame'spages.Farmoreimportantinthealgorithm,thanraisingS/Q,formarketshare,isthenumberofmodels"breadthofline",butthiswillnotbeapparentasitwasnottousuntillaterinthegame.Youwillwanttoincreasethisambiguityforotherteams,aboutthecrucialroleofmodelnumber,byregularlyraisingandloweringS/Q,loweringpriceoraddingcelebrityappealatthesametimeyouGRADUALLYraisethenumberofmodelsinfuturerounds.Itwilldisguisethereasonsforyoursuccesswhichultimatelyliein:economyofscale,breadthofline,andrestrictedstockownership.

    LA,alternatively,hasyettosoakuptheirurbanunemployed.AlthoughasinAsiathereisamigrationfromthecountrysidetothecities,itisoffsetbythemigrationnorthward.Ifyou'replanningonpullingupallyourstakes,cuttingtieswithallyouknow,whywouldyoustopatTegucigalpainsteadofMiami,wherewagesare10timesashigh?Thus,forallpracticalpurposes,thereserverurallaborforceinLAisnonexistentatpresent.IftheflowtoMiamiandotherpointsnorthshouldeverbeinterdicted,youcanexpectthealgorithmsaffectinglabortobeskewedtoaccommodatetheresultinglaborsurplus(amildphrasetodescribethemassiveunemploymentandsocialunrestinLAwhichwouldresult).

    WholesaleMarketingofBrandedFootware

    YouwillwanttouseALLofyourcapacityeveryround,includingthemaximumallowedforovertime.Period.Repeatthattoo:useeverypossibleshoeineveryround.WHEREyouuseitisamorecomplexmatter.Initially,youwilllackthecapacitytodominatethebrandedmarket,andingameswithlargenumbersofteams,oraprofessorcontinuallyinterveningtoexpandmarketsizeinordertosavefailingteams,youmayNEVERhavethecapacitytodominate.Inbothinstances,youwilldumpoffagoodpartofyourproductionintothePrivateLabelmarketATNEARCOSTinordertocreateartificialshortagesforyourproductintheBrandedMarket,allowingyoutoraisepricesandstillbeabletofaceshortfallsinsupplyingthedemandforyourproduct.Thismayseemunethicaltoyou,sinceitmeanstherewillbechildreninLAorAPwhocannolongeraffordshoesbecauseofsuchpricingpractices.Yes,that'strue.ItISunethical,butlookaroundyou.Thesesamefirms,intherealworld,areALSOunabletodeliverhousing,food,orfuel,theVERYBASICOFLIFEtoAMERICANSataffordableprices.Getreal.Thisisbusinessonthecorporatescale.Theonlyjustificationforanyeconomicmodelisitsabilitytodelivergoodsandservicestothosewhoneedthem,andthecorporatemodelceaseddoingthatacenturyago.Tossthescoundrelsoutonyourowntime.ThisistheBSG.It'sagamenotjustGrandTheftAuto,butTHEGrandTheft

    EvangelosHighlight

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    Auto.Andyou'reit.

    Intheearlyrounds,theprivatelabelmarketmayyieldatidyprofit,butasthegameproceeds,youwillbedumpingintothismarketatveryclosetoyourcosts.Ifyoufailtorecognizethis,youwillfindyourselfunderbidandstuckwithmillionsofshoesandalosingroundyoumayneverrecoverfrom.Theprofitswill,commencingearly,comeexclusivelyfromthebrandedmarket.ExperimentwithhowmuchtodumpoffinordertomaximizeEPS/ROE,butageneralruleofthumbisthatitwillneverpaytoputsmallnumbersineitherthebrandedorprivatelabelmarket.ThefixedcostsdistributedacrossasmallnumberofshoesaretoohighbecausethegametreatsasingleplantdistributedacrossboththeBrandedandPLmarketsastwosmallplants.YoucangetawaywithdividinganAPplantof4000into2equalplantsof2000devotedtoeachmarket,barely.Butdividingaplantof2000orlessinto2isapoordecision.Intime,youwilllikelybecomealowcostleader",andfinditmostprofitabletoputallyourshoesinthebrandedmarket.ThatwillresultinlowerROE/EPSforeveryone,somakesureyoutakeadvantageofthefirsfewroundstomaximizepointsforthefuture.Thesearethe7yearsofFat,tobefollowedbythe7yearsofLeanasMosesforecast.

    Aspointedout,thePrivateLabelarenaisalsousefulforpreservingcapacitywhilecreatingartificialshortagesinthebrandedmarket.Butbeware:thePrivateLabelisgenerallyadigital,versusanalogmarket.Yourbidiseitheracceptedoritisnotinmostinstances.Yousellordon't,whereasinthebrandedmarket,youcanusuallysellsomeshoes.ItisacommonmistaketobelievethatbymakingshoesabovetheminimumS/Qsetbytheretailchains,thatabiddingadvantageinPLishad.Itisnot.Onlypricecounts,solongastheminimumS/Qismet.Ifyou'rehavingdifficultyunderstandingthis,putyourselfintheplaceoftheretailchain.Ifgiventheopportunitytobuya$17pairofshoesthatlasts3months,ora$25pairofshoesthatlasts6months,andtackingyour$3profitontothepriceofeither,whichwillyouchoose?Ashoethatwillneedtobereplacedwithanother$3profit,in3months,oronethatneedsreplacedalsowitha$3profitin6months?It'stwiceasprofitabletobuythejunkshoes.There'snothreatoflostsales,really,sincethehandfulofotherretailchainsaredoingthesamething.Environmentalsustainabilityandcustomersatisfactionareimageslogansyouplaceinyourads,usingcelebritiestomouththem,andnotsomethingtobetakenseriously,ineitherthegameorreallifecorporatestrategy.Ifyoufindadoptingthisstrategylookstoyouasthoughyou'rerippingyourneighborsoff,thenveryquicklyfindamirrorandlookyourselfintheeyes.Repeatthistothemirror:"Congratulations."After4yearsofhavingsandflungrepeatedlyinyoureyestoconfusethem,thoseeyesyetserveyouwell.

    Itistheincompletenessofthiscollusiveaspectofthegame'sstructurewhichmostreflectsitobsolescence.ThegamewasdesignedinanerawhenthehiringoftemporaryworkersbythethousandswasgivingwaytotheeraofU.S.corporationsshiftingfactoriesabroad.ThatwastheeraoftheCelticTiger,oftheTaiwanMiracle.TheBSG's"SelfConstructionofCapacitytabreflectssuchanera.Subsequently,thosesamefirmsceasedfoundingfactoriesandinsteadassistedlocalbusinessownersinsettinguptheirownfactories.Atfirst,thesefactoriesmanufacturedcomponentsofproductsandthentheproductsthemselves.Thisallowedthe"parent"firmtorelinquishresponsibilityforhiringandfiring,forenvironmental,safety,andallotherlocallaws.Eventually,thefactoriesweregivenresponsibilityforthecompleteproductandtoday,afactoryinMalaysiawillmanufacturetheproductsoffirmscompetinginthemarket.Intime,ofcourse,theseoutsourcersmakingalltheproductswillbeginmarketingthemundertheirownbrandaswellasothers,andthatspellsdoomfortheoriginalbrands,butthinkshorttermhere.ONLYshortterm.

    Meantime,thedifferencebetweenproductsisamatterofbrandingonly.ThemostmarkedsectorofemploymentexpansioninAmericanindustryisinMarketing,becausethesole

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    differentiationamongmanufacturersisinsuperficialities:"Ourgarbageisbetterthantheirgarbage",eventhoughallthegarbagecomesfromthesamefactories.Anditbecauseofthehomogenousnatureoftheproductsthatnoneofthefirmsisthreatenedbythelackofquality.Theanswertoconsumerdissatisfactionisalways:"Whereareyougoingtogo?"

    Onceyou'vefinishedtheabove,moveontotheWholesaleMarketingtab

    WholesaleMarketing

    ThispageisascomplexastheBrandedProductionPageabove,withslightlyfewervariables.Thegoalistosellyourshoesatapricecreatingademandwhichresultsinashortfallof,say,15to25ineachofthe4marketingregions.Youdothisbyadjustingprice,Retailsupport,Deliverytime,rebatesandusingthePrivateLabelmarket(seeelsewhereonthispage.YouwillwanttogofromthispagetotheBrandedDistributionPagetoseeclearlytheimpactonthemarket:

    Theideahereissimplytoshipallyourshoes,focusingonthemostprofitableregionsandcompletelyshortingtherest.

    PrivateLabel

    StayoutofthePrivateLabelMarketexcepttocreatetheshortagesinthebrandedmarketmentionedabove.Initially,moneycanbemadeonbidsinthePL.Overtime,theotherteamsmaybegintreatingtheprivatelabelmarketlikea"milkcow",anditwillbetempting.Butasthegameproceeds,thepriceswillfalldramaticallyinthePL.Atthepointforus,thelastroundwhereyourcapacitypermitsasingleplanttobedevotedtothePrivateLabelmarket,andtaketheentirething,doso.Itwouldbebestifyouhadn'tputanythingintothePLmarkettheprecedingrounds.Itwillcomeasashock,andtheotherteamsmayhavebidhighpricestoincreasetheprofitabilityofthemarket.ThatallowsyourbidstosweepthePL.Formyteam,wesweptthePLthelastround.Weunexpectedlydropped10,000,000shoesinthePLfromourNAplant,whichwepickedupasusedandwhichproducedshoesonlyforthePLmarket,andwetookitall,usingtheother2plantstofeedthebrandedlabelmarket.Itlefttheotherteamswith10,000,000shoesfromPLthattheycouldn'tmove,andhalfouroppositionendedwithnegativeROE/EPS,withstockprices,creditratingandinvestorconfidenceflounderingasbadly.Ourtwostrongestcompetitorswentbankrupt.Periodically,ifyou'veestablishedyourreputationaslowcostleader,youcanthrowafewhundredthousandshoesintotheprivatelabelmarketatalittleabovecosttowatchthepricesandprofitsofpanickedteamsdropdrasticallyintheprivatelabelmarket,butitshouldbeastrategicmoveonly.Inrecentgames,pricepressuresinthePLhaveincreasinglybroughtprofitstheretonilearlyoninthegame,andinthatinstance,ifnoprofitistobemade,youwillsimplydumpanyunprofitableplantcapacity(likelyNA)inthePLatcost.Inisolatedinstances,verystrongteams,withcapacitiesexceeding25,000,haveeasilydominatedtheentirePLmarketbydevoting2entirefactoriestothePL,withsubstantialprofitsoverseveralturns.Earlyinthegame,youwillfaceasituationwhereyourcapacityislargerthanthebrandedmarketandyouwillwanttopawnofftheexcesstothePLmarketjusttoprotectyourcapacityuntilthebrandedmarketexpands.

    Celebrities

    YouwillwanttobidoncelebritiesfromRound1.AlthoughOprah(andthenamesofthestarsvarybyprofessor)ismoreappealingforhernumbers,Anikaismoreofanassetforherlongevity.Oprahwascontracted,inRound1ofourgame,for$8millioninitially,Anika(thenamesofcelebritiescanbealteredbyprofessorsAnikaisusedbecauseher6yearcontract

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    islongterm)for$1.5million.Forpurposesofcomparison,bytheendofthegame,1teamwasbidding$42millionforacelebritywithlowernumbersthaneitherAnikaorOprah,butyouwillnotwanttosetoutonsuchanexpensiveroadatthebeginningofthegame.Theaddedcostof34dollarsperpairensuingfromsuchasinglebidisquestionablyworthit.Keepthebidsreasonable,buthighenoughtowinatleast1celebrityinRound1,preferablyonewithalongtermcontract,ifyoucan.Ihavewrittenasmallapplicationforuseincalculatingthevalueofacelbritytoyourteam,here.Ithaslittleerrorchecking,sofollowtheinstructionsfaithfully.Ifinitialwinningbidsbeginat$2025million,forgetthecelebritiesaltogetheruntilpricesfall,astheywill.Inreportsfromstudentsplayingrecentgames,thecostofcelebritiesissoaringinsomeregionsoftherealworld,andthepricesofshoesarerisingtoreflectit.Youdon'twanttobeleadingthatpack.Youcangetaroughideaoftheworthofacelebritybyusingtheforecastscreen,althoughincreasesinfuturecapacityneedtoaccountedfor.AstudentfromIndonesia,playinginAustraliasummeditup:"Let'ssaythat,ifweputacelebrityundercontract,itgivesusanadditional0.5%marketshareinallregions.Andthenwefindoutwecanalsoget0.5%moremarketshareifwereducethepriceofeveryshoesby$0.50.Ifthetotalnumberofextrashoeswesellis10millionpairs,thenthecelebrityisapproximatelyworth10million*0.5=5million.Themorecapacitywehave,themorevaluableacelebrityis."That'sonlytrueiftheprofitmargindoesnotfallwiththeincreaseinmarketshare.Thevalueofacelebrityistheprofitmarginmultipliedbythenumberofextrashoessoldineachregion.Sincetheprofitmarginvariesfromregiontoregion,thevalueofacelebritydoestoo,INADDITIONtothevarianceinregionalappeal.

    Onceyouhavefinishedmanipulatingtheabovenumbers,gobacktotheSalesForecasttab.

    Youwillseemuchoftheworkyouhavealreadydoneisreflectedonthispagenow.Setyourinternetshoepricehere,slightlyabovetheretailprice.Themanualtellsyouthatretailerswillfallawayifyousellshoesontheinternetforlessthan40%abovetheretailprice.That'strue,butthenumberofretailersshouldbeyourlastconsideration(unlessyou'veignoredthemforsolongthattheshrinkagehasbecomeconstricting).Thenumberofshoesindemandwillbehandledbytheremainingretailersprovidedyoukeepitreasonable.Ifitseemsthatyourretailersarefallingawayalarmingly,upyourinternetpricessomewhat.OntheSalesForecastpage,youcanfinetunesuchthingsasadvertising.Somehardnumbersmaybeusefulhere,sincestudentsseemtogenerallyapproachtheseareaswithnoideaofwhattheyshouldbe.Youradvertisingbudgetinthevariousregionsshouldbesetinitiallyatsomethinglike$9000forNAandEA,and5000forAPandLA.Thesewillclimbto1520,000forNA/EAand750010,000forAP/LA.SeewhatisneededtogivetheshortfallsinBrandedshoesupplythatyouwant.Rebatesshouldbesetto0,deliverytimeto3.Retailsupportshouldnotexceed250350andthenumberofretailersshouldnotexceed2500forNA/EA(and1500isacceptable).ForLA/APitcanbe1500and1200isacceptable.Theadditionalmoneyspentonretailersupport,multipliedbytheadditionalnumberofretailers,canbeexpensive.IfyoulowerS/Q,sellingoffinventorymakesnosense.IfyourcurrenttargetedS/QforNAisa7,andyouhavelargenumbersofshoesintheregionleftfromlastdecisionwhicharean8,thenyoucanmanufactureshoesinNAata6toreachyourtargetof7,sincetheS/Qisanaverage.ItalmostneverpaystoselloffinventoryinaregionfromaprecedingdecisionofthatinventoryisahigherS/Qthanthecurrentplannedtarget.

    Insettlingonthenumbersforthispage,youshouldtrytwoversions:

    1)Theversionwherethe"industryaverage"issetbytheBSG.

    2)Theversionwherethe"industryaverage"issetatthedecisionsofyourstrongestopponent,withtheassumptionthatyouropponentwillonlytrytobecomestronger(lower

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    prices,higheradsupport,etc.).Thiswillgiveyoutheworstcasescenario.

    ANOTEONIMAGE:

    Imageisprobablytheareayoushouldworryleastabout.Itshouldfollowmarketshareanyway.But,perhapsasaresultofthispageandthewinningstrategieswhichhaveensued,McGrawHillhasintroducedanoptioncalled"corporatecitizenship".Thepageisdesignedtoboostimageratingsforyourteam,ostensibly,butactuallyisdesignedtoboosttheimageofglobalcorporations.TheoptionsonthepagerarelyaffectEPS/ROEpositivelyexceptfortheenergyinitiatives,andthatonlyirregularly.Thispage,incidentally,isnotFantasyland,sincethesectionisonlydesignedtoboostimage,nottocontributeinanymeaningfulwaytoaresponsibleroleforyourcorporation.That'sactuallythefunctionof"greenness"inthecorporateworld.Itisamarketingtoolandlookingbeneaththecoversofanycorporate"greeninitiative"willinvariablyrevealagrimierreality.Forexample,themandatesoftheEPAortheEUareoftenportrayedasacorporate"greeninitiative"incompanyadvertising.Inreality,theyaremandatedbylaw,andinmostcaseswerefoughtbitterlybytheverysamecorporationsnowboastingofthem.

    ROUNDBYROUNDOUREXPERIENCE

    Note:thenumberofroundsinthegameissetindividuallybyeachprofessor.Ihaveseenverylonggamesinclasseswhereprofessorsspentayearonthecourse.ButIhavealsoseenprofessorswhohadtheirstudentsstartthegameanewseveraltimes,eachwithonly4rounds,playedrepeatedlythroughoutthecourse.Followingaretheactualresultsforourteam.Remember,thiswasaFIRST,ineptattemptatputtingtheaboveprinciplesintoplay.Since,wehavecollaboratedwithhundredsofteamsandhaverefinedthestrategyasoutlinedabove.

    ROUND1:DONOTWINSMASHINGLY

    Ifyouchoosetolosethisroundsoyoucanbuyupyourstock2ndround(therearelimitsontheamountofstockyoucanbuybackinthegame),prepareyourself.Itisashockforeveryteamwhichsetsoutonsuchacoursewhenitactuallyoccurs.Andprofessorstendtobecomealarmedaswell.OneteaminSouthAfricareceivedasummonsfor"counseling"fromaninstructorafterRound1,gravelyinformingthemthattheyhaddoneworsethanaplaceboteamwithnooneinit,andthathewasalarmedandconcernedfortheirfuturewellbeinginlife.Recoveryfromagrandlosscanbeslow,althoughagreatdealofmoneycanbesavedinbuyingupthestock.

    Round1resultsforourteam(ThepricesinNAwerereflectiveofpricesinallregions.WewereTeamB)

    Team PriceofshoesinNA S/Q MNA 50 7 249B 34.70 7 52C 50 6 200D 48.50 6 249E 49 6 200F 50 7 249G 52 7 217

    *MN=ModelNumber

    AlthoughyoudonotwanttogobankruptinRound1,youmaywanttoloseit,sothatyourstockpricefalls(although,astrafficonthispagehasincreasedtosome200newusers

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    daily,thegameisgettingtighter,andforfeitingthefirstroundbadlymayputyouatadistinctandfataldisadvantageforseveralrounds).Ifyouselectaminimumnumberofmodelnumbersforyourshoes,andkeepyourpriceslowenough,andyoucanalmostbeguaranteedofthatresult,dependinguponthechoicesyouropponentsmake.However,ifthestockrises,youshouldstillbuyitupsinceequitywillfall,leadingtoahigherROE(Return/Equity)thanifyoudidnot.

    Alwaysspendtimeonthedecisionsandresultsofothers.Especiallyearlyinthegame,whenslightdifferencesinotherteams'approacheswillillustratewhatisworkingbest.Theinstructorcansetmanyoftheparametersinthegame,andyouwillwanttotailoryourmovesaccordingly.Youarepermittedtoseethesameresultsforotherteamsthatyouseeforyourown,withaclickhere,aclickthere.Itwilldeterminetheoutcomeofthegame.

    Lookforslightvariationsinthedecisionsmadebytheseotherteamseven,andmaybeespeciallythosewhodonotwintheroundfromweektoweekandlookattheoutcome.Attimes,youropponentswillnotthemselvesbeawareoftheserelationshipsamongtrailingteams,becausetheywillbecomparingthemselvestotheleaders.Youcanlearnfromthem.Forexample,ateam(TeamDbelow)whichdeclinedtoraiseS/Qdidrespectably,thoughmakingerrorselsewheretheirpriceswerehigher,theirmodelnumberslower.Asaconsequence,theyplaced3rd.Buttheirsavingsinexpenseslargelycancelledthemistakes.Becausetheydidnotfareaswellastheleaders,theychangedcoursethefollowingroundanduppedtheirS/Q,withtheresultthattheyfellfurtherbehind.Butevenaninexperiencedobservercouldspotthedistinctionbetweenthisteamandateamwhosedecisionwereexactlyalike,exceptfortheS/Q(theotherhadraisedS/Q).Andtheotherteamdidpoorlybycomparison.ThereasontheotherteamsdidnotspotthedifferencesandquitpursuingS/Qisbecausetheywerefocusedonlyonthemovesoftheteamwhichledafterthefirstround.Thatwillnot,ifyoufollowouradvice,beyours.

    Aboveall,rememberthatthisisagameovertime,nota"suddendeath"playoff.KeepyourSherlockHolmeshaton,throughoutthegame.LookattheStrategicGroupMapforeachregion.Ifalltheothercompaniesarecuttingoneanother'sthroatsintheupperendofthemarket(andvanitybeingasitis,theywillmostlikely,unlessthey'realsoreadingthis),headforthelowend,butnotallatonce.Drifttheresoasnottomakeitevidentwhatyou'redoing.Ifthey'reinthelowend,headslightlyhigherbutbeattheminpriceswithyourhigherproductioncapacityEconomyofScale.Studyyouropponentscarefully.Getafeelfortheirfoiblesaswellastheirsuccesses.

    Theinverseisalsotrue.Therewillbeatleastoneotherteamlookingatyourresultsunderthesamemicroscopeyouareturningonthem,andespeciallyifyouconsistentlyaredoingwell,asyoushouldbe,laterinthegame.Asaconsequence,itisbestthat,whenyoumakedecisionsshiftingyourpositioninthemarket,thatyoudosowithatleast2changes.Ifyoudowellintheround,eventhoughyoubelieveyouknowwhichofthe2changeswascrucial,youropponentsmaynot.Andthereisa50%chancethattheywillchoosethewronganswerwhentryingtoguesswhichwasresponsibleforyoursuccess.Trustinthe"sheepmentality"prevailing.Themajorityofthose"intheroom"willlookforsafetyintheherd.Theywilltryrepeatedlytoapeyou.Yourbestadvantageinthegamearetheelementsofconfusionandsurprise.Rememberthisisagame,astrategygame,andlikesimplerstrategygames,suchasrockpaperscissors,agoodpartofthegameisinleadingyouropponentstobelieveyouwillbemakingmovesinadirectionexactlyoppositeofwhereyouaretrulyheaded.

    Ifyourstockpricetanksafterthefirstround,thenifyouaresmart,youwillmakearrangementstobuynearlyallofyourstockback.Weinplanningthefollowingroundscouldborrowenoughtobuybackallthestocksharespermitted(2,500,000of10,000,000shares)in2roundsandtherestofthegameweweredividingby3(theremaining7,500,000shares)whileothersweredividingby4(theoriginal10millionshares)in4inROE/EPS

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    calculationsgivingthemanautomatic33.3%disadvantageinscoringuntil2otherteams"caughton"lateinthegameanddidlikewise.3of7teamsactuallysoldshares,increasingthenumberby20%andfurtherdisadvantagingthem.

    Thefirstround,andtherestofthegame,willbecatandmouseor,rather,lionandmousesinceyounowhaveanadvantageincapacitywhichotherswillbeunlikelytomatchthroughouttherestofthegameprovidedyoustayapaceofthem.Butyouwanttomakeituncleareachturnwhatyouwillbedoingnext.MyteamwentfromS/Q6atthebeginningofthegametoS/Q7inRound1,thentoS/Q8inRound2.Wetooktheround,butfailedtomeettheminimumof15%inROEbyhalfapointbecauseweidlyspenttoachievean8S/Qalongwithincreasingcapacityanddoingupgrades.ButourraisingtheS/QandretainingtheleadhadtheadvantageofpropellingtherestoftheteamstowardchasinganelusiveandexpensiveS/Qof10whichateamachieved,fornopurposereally,inthelastroundwhilewedroppedtoS/Q7inRound3andstayedtherebeforedroppingtoS/Q6inthefinalround.Atnopointwerepeoplematchingourinvestmentinproduction,andfollowingsuggestionsmadebytheinstructorinthebeginningofthegamemanysoldoffexcessproductionstock.Westayedupuntiltheresultsofeachroundwaspostedsothatwecouldpurchaseanycapacityforsaleimmediately,beforeotherscould(thesepurchasesaremadeontheportalpage)refreshingthepageeveryfewsecondsasinanebayauction.Itwascrucialtotheoutcome.NewbutUsedcapacityisboughtata20%discount.ManyteamshavehadsuccesssellingoffALLtheirNAcapacityoncetheLAplantiscapableofsupplyingbothNAandLAdemand.HoweveralltheotherteamsareusuallydoingthesameandsuccesshasalsobeenenjoyedbysomeofthosewhotookadvantageofthedumpingandbuiltupanNAmonolithcheaply.DoNOTletanyethicalconcernsaboutwipingoutyourfather'sjobconcernyouhere.Incaseyouhaven'tfigureditout,agoodpartofyourbusinesscoursesaredesignedtoinureanddesensitizeyoutosuchhumandilemmas,toreduceyoutoanautomatoncapableoffocusingonlyonmonetaryreturnsconfinedto"your"company.Ifyoubuyintothat,inyour"reallife",youarenotonlyachumpbutadangertoyourcountry(whereverthatmightbe),butforthepurposesoftheGame,pretendyoudo.

    Round2

    Round2inNATeam PriceinNA S/Q MNA 49 7 250B 42.13 8 150C 55 8 244D 49 7 240E 50 7 200F 48.99 8 344G 47.77 7 206

    Inretrospect,ourS/Q8inRound2wasagoodideabecauseitcreatedconfusionastowherewewereheadedwhen,nextround,wedroppedbacktoS/Q7(weshould,perhaps,havegoneto5),butweshouldhaveandIexpectyoutoincreasemodelnumberto350500andwelikelywouldhaveexceededinvestorexpectations.WedidthatinRound3andthereafter.TheonlyteamwhichwoncelebritybidsbeforethisroundwereTeamA.Despiteverysimilarprices,S/Q,etc.,TeamAsold50%moreshoesthanTeamD,whichbroughthometoustheimportanceofwinningsomeendorsements.WethusbidonandwonTiger

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    for$6.2million.YoualsowillwanttobidoncelebritiessothatbyRound4youhavesuperiorityinthisfieldifitcanatallbejustifiedeconomically.

    Team MS ROE EPS SPA 17.1 5.1 .85 15.84B 21.8 14.8 2.76 29.80C 9.3 .2 .03 17.55D 12.3 4.5 .83 21.89E 9.7 .6 .09 10.89F 16.1 9.5 1.68 33.28G 13.8 7.5 1.48 12.63

    Thepatternwasthesameformarketshare,EPSandROEasinthenextfewrounds:Ourteam'sprimaryopponentswereTeamFandGinthefightformarketshare.TeamA'sstrongmarketsharewasbasedstrictlyonitscelebritiesandwedeterminedtokickthosesupportsoutintime.Inround2andeveryroundthereafter,youwillwanttoadjusttheproductionnumberstomaximizeprofitabilityperpairofshoes,bidoncelebrities,increaseyourdividendbyapennyassuggestedabove,etc.

    Round3

    Round3Team PriceinNA S/Q MNA 50 7 250B 44.90 7 319C 49.99 9 343D 47 7 331E 48 7 244F 51.45 9 333G 46.24 8 200

    Bythe3rdround,myteamhaddevelopedapatternwhichwouldlargelybecomeroutineforusandwhichyoushouldmakeroutinetoo:addcapacity,playwithnumbersontheproductionpagetoachievethecheapestshoe,workingourwayup,eventually,tothemaximumof500models,withTQMandBestpracticesatamaximum,adjustingwages,styling,percentageofsuperiormaterials,incentives,etc.toachievethelowestpriceshoes.Ifyouhaveanystockoutstandingwhichyoucanpurchase,doso.Alwayscomparecurrentinterestrateswithpastloans.Borrowtopaythemdown.Borrowtoincreasecapacity.Borrowtobuybackstock.Borrowforplantupgradesiftheyprovepromising.Thenturntothepricingpage.Lookingateachofyouropponents'priceslastturn,calculateasifyouropponentswill,nextturn,droppricesby$1.50$2andmakesureyoubeatthatprice.AddthemaximumallowableforLA(750,000foranexistingplantof1,500,000inourcase).Theonlyotherteamtoaddcapacityinourgamethatyearopenedaplantof1000inEA,whichprovedtobeoflittlevaluetherestofthegame.Celebrityappealcan,bytheway,overcomeadifferenceinpricestosomedegree.Image,aspointedoutabove,consistsof2components:S/Qandmarketshare.Thelatter,inturn,consistsof3separatespheres:theinternet,thebrandedmarket,andtheprivatelabelmarket.The3appeartoactindependentlyofoneanother.Thus,totaldominanceinthePLmarketwhichyoucannotpossiblyachieveatthispointinthegamecangiveanimageof100,largelyindependentofwhathappensinthebrandedmarket.SinceS/Qisexpensivecostsmoneywhilemarketshareyieldsmoney,wefocusedhenceforthlittleattentiononS/Qandmoreonmarketshare.

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    Team Capacityatonsetof4thRoundA 7000B 9050C 6000D 6600E 6000F 7000G 8000

    Attheendoftheroundwepickedup400,000usedcapacityinNA(usedcapacityisavailableforuseimmediatelyandyouwillalmostinvariablyfindNAcapacityisthefirsttobegivenup).TheresultsforRound3were:

    Team MS* ROE EPS SPA 16% 10.9 1.97 17.82B 21.6 22.5 4.43 59.30C 12.4 0 .01 10.83D 14.7 6.2 1.16 12.70E 10.3 .5 .08 6.87F 13.5 12.9 2.26 23.73G 11..7 .6 .10 8.12

    *MS=MarketshareinNA

    Webidon,andwonNatalieKwanat$13millionandSergioat$9million.WealsopickedupPaytonat$3millionsimplytoknockoutTeamA'ssolesupportits2celebrities(wewouldpickupOprah,the2nd,later).Remember,you'renotfocusingonrunningsomesortofideal"goodbusiness"here.You'refocusingonruiningyouropponents.It'sessentialthatintheantepenultimateround(theroundbeforethenexttolastround,whichforus,Round4was,althoughmanyinstructorsshortenthegamebyaroundortwo,sometimesunexpectedly,andothersdragthegameoutoverasemester,orevenanentireyear),youhavesuperiorityincelebrityappeal.Inthatround,youcanthenlocksuperiorityincelebrityappealin,atminimalexpenseforthefollowing2roundsbybiddingunexpectedlyhighforALLthecelebrities(Forourteamthatmeantbidding$20,156,000foreachapproximately50%higherthanpreviousbids.Youwillwinthemall,thencancelallbutwhatyouneedtomaintainsuperiorityatthebeginningofthepenultimate(nexttolast)round.Theotherteamswillseenoneofthecancellationsuntiltheeveofthelastroundinwhichcaseitwillbeofnovaluesincetheywouldonlybidoncelebritiesforanonexistentfutureround..Itwillcostyou10%ofthecontractstocancelnextround(forourteam,thiswasatotalof$10millionandchange)whichisnegligiblecomparedtothecostofcompetingagainstthemorofactuallybiddingonallofthemandespeciallyoflosingthecelebrities.Thefollowinground(thepenultimate),therewillbethosewhoseeyourbidstheprecedingroundandactuallytrytooutbidyouwithoutknowingyou'recancelingasthey'rebidding.Inourcase,oneteambidthus$42millionforaminorcelebrity.Mostteamswillsimplygiveup.You'llrepeattheprocessinthenext(penultimate)roundofcourse,biddingslightlyhigherthanthelast(webid22,500,000foreachandwononlyoneofthe3availablewithouropponentsbiddingastronomicalsumstotrytoemulateour"success",sincewealreadyhadandwerecancelingtheothers.Wethusalreadyhadsuperiorityofcourse,andcancelledthenewlywononetoo,inthelastround.Theother2were"won"byteamswhichnowhadtoraisepricesonshoesalreadytooexpensive,cancellingneverhavingoccurredtothem,andnotreallyanoptiongivenoursuperiority.Onewasaprimarycompetitorandbecauseweshutdowntheprivatelabelmarketbyfloodingitwithcheapshoes,webankruptedthemthelast

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    round.Havinganexpensivecelebritybilldidn'thelpthemeither.).

    Ifthisseemscomplex,perhapsthefollowingmakesthingsclearer:

    LockinginCelebrityDominanceWhenthereare4roundsleftinthegame,then:

    Round1(ofthelast4):Ensureyourteamhascelebritydominanceforthisroundonly.Itneedn'tbeagreatadvantage.

    Round2(ofthelast4):Bid50%higherthanhaseverbeenbidforanycelebrity,oneachoneavailable.Thiswillbeanastronomicalsumbutitwilldenyyouropponentsanychangeinyourcelebritydominance.Youropponentswillonlyseethesewinningbidsthefollowinground(3rdRound).

    Round3(ofthelast4):Youwillcancelallcelebritycontractsexceptwhatyouneedtomaintaindominance.Youropponentswillnotseethisuntiltheeveofthenextround(Round4),whichisthelastroundandcelebritydominanceontheirpart,atthatpoint,isuselesssincethereisnofutureround.Thecostofcancellingthesecontractstoyouis10%,whichisnegligiblecomparedtothecostofgivingthemthecelebrities(allofthisassumesyouhavefollowedtheaboveinstructionsandaredoingwellinthegame,andcanthereforeaffordthefinancialpenalty).Atthispointallyouropponentscanseeisthatyouaredoingwellandpartofitmustbeattributabletoyourdominanceinthecelebrityfield.Theyaresheep,afterall,inmanycases,andwilltrytoemulateyou,willinfactlikelybidevenhigherthanyouinthelastround,andlackingdominanceinthearea,willbesaddledwiththosecostsfinalround,whentheycannotcancelcontractsassumingtheyknowthat'sfeasiblewithoutfurthererodingtheirposition.Younowhavethembetweenarockandahardplace.

    Round4(ofthelast4):Lastround.Theygobroke.Youwin.Comprendez?

    THE3YEARPLAN

    Atsomepoint,yourinstructorwilllikelyaskyoutofillouta3yearbusinessplan.Sinceadisproportionatelylargepartofyourgaminggradedependsonit,thisisnotsomethingtoapproachedlightly.Inmyclass,itwastheontheeveofthe4throundwhenwewererequiredtosubmitourplan.Dothisplancarefully,meetingminimumtargetsforinvestorexpectationsandexceedingthemineachyear,butdonotgetcarriedaway.Meetingandespeciallyexceedinglowertargetswillyieldahigherscorethanmissinggoals.

    Round4

    Team PriceinNA S/Q MNA 50.75 8 250B 47.72 7 500C 49.5 9 252D 48.99 8 301E 48 8 247F 55 9 466G 47.75 7 200

    Results:

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    Team MS* ROE EPS SPA 14% 10.9 1.97 17.82B 25.5 22.5 4.43 59.30C 13.8 0 .01 10.83D 14.4 6.2 1.16 12.70E 11.3 .5 .08 6.87F 10.6 12.9 2.26 23.73G 10.4 .6 .10 8.12

    Round5:Theinstructor'sIntervention

    AfterRound4,ourmarketsharewasnearlydoublethatofourclosestcompetitor,andseveralteamswere,asweintended,drowningininventories(oneteamhad6monthsinventory)whichtheycouldn'tmoveandwereonthevergeofbankruptcy(defaultonprinciple/interestpayments),havingreceivedtoomany1yremergencyloanstocovertheircashshortages.Theinstructorhadpreviousrelationshipswithsomeofthosestudents,andinourestimationintervenedto"savetheirbacon".Sheincreaseddemandshesaiditwasforthefirsttimein15+years"by10%topermitthemtomovetheirinventoriesandworkedwithseveraloftheteamstoimprovetheirscores.Henceforth,wewerenotonlypittedagainsttheotherteams,buteffectivelyagainsttheinstructorherself.She,however,liketheotherteamsthemselves,failedtograspthetrueimplicationsofEconomyofScaleandadvisedthosewithexcessinventoriestosell,ratherthanadd,capacity(thusspreadingfixedcostsoveralargernumberofshoes,permittingpricestobeloweredandthusmarketshareincreased).Otherteamshavehadtheinstructorintervenetofreezecapacityadditionsduetoexcessinventories,inwhichcase,you'dbetterbeleadinginnumbersofshoesproduced.

    Atthebeginningoftheround,wepickedup5300(thousands)ofusedcapacityinNAandAsia.

    TeamCapacityatonsetof5thRoundA 7000B 15,950C 6000D 6600E 5000F 6500G 5800

    Team PriceinNA S/Q MNA 49.99 8 331B 43.66 7 500C 52.49 9 346D 50.25 9 323E 48 8 250F 56 9 498G 48.50 7 245

    Results:

    Team MS* ROE EPS SP

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    A 10.1 .6 .12 6.48B 33.1 33.4 11.47 223.75C 12 6.2 1.39 18.90D 11.3 6.2 1.37 15.37E 10.1 4.5 .83 9.39F 13.4 10.9 1.90 18.96G 10 5.2 .95 8.22

    *MS=MarketshareinNA,SP=StockPrice

    DemandinYear5was49,839thousands)Ouredgeincapacitywouldhavebeensufficienttowinthegamebutnotasdecisively.Youwillwanttodoaswedid,andtakeout1,5and10yearloanslater,ontheeveofthelastround(forus,Round6),andorderanadditional5600(thousands)capacityinpreparationforround6.Sinceyouhavenoresponsibilitytopaythelongtermloansoffinnonexistentfuturerounds,debtatthispointisoflittleconcernsolongasyoucanmaketheannualpaymentrequireforthelastround.Ournemesis,TeamF,orderedanother1200(thousands).Wecancelledallthecontractsforcelebritieswhichwewonexceptforthenumbernecessarytokeepoursupremacy.Wealsodecidedtorepeattheprocessandbidastronomicallyonthosenewlyavailableat22,500,000apiece,knowingthatifwewonthem,wewouldtakethe$8.8millionpenalty(10%forcancellingcontracts),andknowingitwouldbecheapcomparedtoallowingsometoescapecheaplywhilewebidonothers.However,weexpected12teamstolookatourwinningthepreviousround,believingustobepracticalinbusinessmattersandbelievingtheastronomicalpricesmustthereforebeworthit(itdidnotbecomeapparentuntilthebeginningofRound16thatwehadcancelledthecontracts)andweexpectedthattheywouldoutbidusonatleastsome.Intruth,ournemesisFbid50%higherthanourownridiculousbidson2celebrities,andTeamCdoubledourbid(200%)onanother.Wewishedthemwellnotreally,consideringtheadditionalcostsaddedtotheirshoeprices.TeamGhadcaughtontoourS/Qstrategy,andseveralteamsnowbegantograsptheimportanceofmodelnumber.

    Round6

    Ourteamhadshunnedtheprivatelabelmarketexcepttotossafewhereandtheretothreatenentryandthusholdpricesandprofitsdownontheotherteams'parts.WehadnotdoneeventhelatterforseveralroundsandthevariousteamshadbeguntoviewthePLmarketasasourceofgoodprofit,typicallysubmittingonlybidsthatwereashighasthoseinthebrandedmarkets.Onlyapartofthishighpricingwasduetothefactthattheyweredividingsmallplantsbetween2marketsitwassheergreed.WerealizedthatdevotingourentireNAplanttothePLpermittedustobidonnearlyallthe9million+shoes,atapriceradicallylowerthanourcompetitorsandyetmakehugeprofits.Wealsodeterminedthatdoingso,gaveusanimageratingof100,thesameasifwe'dproduceda10withalargemarketshare.WethereforedroppedtheS/Qandpricesinthebrandedmarketandyoumayfindthesametacticuseful,todroptheentireNAplant'soutput(pershoe,themostexpensivefactoriesinthebrandedmarket)intothePL.

    Thefinalround,'stockingout'(creatingmoredemandthancanbefilled,asaresultoflowprices)whichinpreviousroundscarriesanuisancepenaltyofreducingthenumberofretailersavailableandtherequirement(withpenaltyofretailersdroppingawayanarchaicpenaltynolongerapplyingintherealworld,incidentally)inpreviousroundsforaninternetpricenotmuchlessthantheretailprice+40%foranyregionisofnoconsequencesincethereisnofutureround.Therefore,theinternetpricecanbesetatanythingandbystockingoutsufficiently,onecanbeprettyclosetothetargetsindicatedbytheforecastspreadsheet,providedyourpricesarelowest.

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    Team PLPriceRound6inNA #shoessold(000s)A (nobids) B 31.72 2310C 45 261D 48.50 218E 47 300F 43.98 198G 44 137

    Needlesstosay,ourbidwasacceptedandnoneoftheotherteams'were

    BrandedPricesinNA:

    Team PriceinNA S/Q MNA 50.25 8 342B 42.22 6 500C 53 10 350D 51.50 9 331E 49 8 250F 56 9 500G 54 8 156

    Results:

    TeamMS* ROE EPS SPA 10.7% 4.6 .9 4.75B 31.7 38.5 19.10 392.12C 13.2 8.7 2.07 30.19D 12.1 7.4 1.75 20.35E 10.6 2.7 .53 6.32F 14.2 10.6 1.84 11.15G 7.5 18.9 3.22 5.66

    *MarketShareinNABrandedMarketwetookallthePL

    Round6wasthe"coupdegras".TeamsFandG,our2closestcompetitors,defaultedontheirinterestpayments,throwingthemintobankruptcy.Theinstructor,whohadplannedongivingoutgradeswhichwere50%basedonGametoDatePerformancescores,and50%basedonInvestorConfidencelevels,hadinsteadtoturntoacurvegradeacurvewhosecomponentsshedeclinedtoexplainsincetheoriginalplanyielded:

    Team GradeA 35.5%B 100.5%C 58%D 57.5%E 45.5%F 54.5%G 29.5%

    Ineffect,therewouldhavebeenone'A'andsix'F'gradesforthegame.

    Hereisanexamplefromaroundmidgame,sentbyateamseveralyearsago.Itmaygiveyouafeelforhowthedecisionsaremadeusingthestrategydetailedabove.Ifyouhavequestions,writemeherewiththesubjectheadlineBSG.Andyes,themailaddressisatthe

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    bottomofthepagebecauseIdon'tevenwanttotalktoyouunlessyou'vereadthisfar.I'vehadtoomanypeoplewriteme,tellingmetheycan'tflunkthiscourseorelsethey'redoomed,buttheydon'twanttoputintoomucheffortoniteither.Ifyou'vedoneyourhomeworkandarestillbaffled,oraresimplypuzzledorfailinginyourgame,I'mhappytotalktoyou.Butremember,that'strueonlyforstudentsneedingtopassthiscourse.If,ontheotherhand,youfindyourselfbeinginvitedtotheGlobalsChampionships,you'reonyourown.That'sextracurricularactivityasfarasI'mconcernedandyou'reonyourown.

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