PARIS BOSTON www.stratxsimulations.com

The Markstrat Challenge I

Welcome to Markstrat Congratulations for your new position!

You have been recruited to manage the marketing department of the Electronics division of a large corporation You will compete with several other firms to market two types of durable goods to consumers You will be responsible for formulating and implementing the long-term marketing strategy of your division This short introduction will help you perfect your knowledge of the Markstrat world

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Your role for the next 10 years

Work in a highly competitive market

Target consumer segments and position your products

Interface with R&D to design and develop new products

Launch new products and improve existing ones

Interface with the production department

Make marketing mix decisions: pricing, advertising,

Decide on the size and priorities of your commercial team

Order market research studies to get up-to-date information for decision making.

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Getting started

Managing your firm

The Markstrat

World

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The Markstrat World

A large territory with a highly developed economy A population of 80 million inhabitants, 40% Urban (in the top five cities), 25% in smaller urban areas and 35% rural Inflation and GNP growth are fairly stable No major political, social or economic event is anticipated in the near future Currency: Markstrat Dollar ($)

Markstrat City

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Up to 6 competitors fight in this market

Each team will manage one of these competitors. All firms start in a different situation Product specification, target consumers, brand awareness levels,

market share, distribution coverage, profitability, R&D expertise, ...

The marketing strategy of your firm should be adapted to its particular situation

Choose a name for your company Starting with its initial (L, M, N, R, S or T) Reflecting the spirit within your team: do you feel like Tigers or

Turtles?

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Each firm can compete in up to two product categories

You can market up to 5 brands in each category at a given time

Independent

Not substitutes

Not complements

SONITES VODITES

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Sonite brands are already marketed, each characterized by 6 main attributes

Number of Features 10 20

Design Index 3 10

Battery Life 24 96 Hours (H)

Display Size 4 40 Inches ()

Processing Power 5 100 Gigaflops (Gflops)

Base Cost Minimum $10

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Resolution 20 100 lines/mm

Energy Efficiency 10 100 bio computations/Wh

Carbon Footprint 5 50 Kg

Connectivity Index 3 10

Number of Apps 5 100

Base Cost Minimum $10

No Vodites exist yet. Experts believe that they will be characterized by

$ 11/09/2012 9 Introduction to the Markstrat Challenge - Part I

It is easy to recognize the origin of the brands from their names

Product Category:

O = Sonite

E = Vodite

Company marketing the brand:

L, M, N, R, S, T

Freely chosen letters or numbers

T O NIC M E LODY

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Sonite consumers have traditionally been classified into 5 segments

Highly interested in Sonite product Demand high performance products Quite price sensitive

EXPLORERS (Ex)

Personal and professional usage Look for high quality, high-performance and easy-to-use products Can afford expensive products

PROFESSIONALS (Pr)

Good product knowledge through extensive product comparison. Demand high qualityprice ratio Quite price-sensitive.

SHOPPERS (Sh)

High income level Demand performance and convenience Purchase expensive products

HIGH EARNERS (Hi)

Cautious in the way they spend their money Demand cheap, low-performance, average convenience products Future growth rate could exceed forecasts.

SAVERS (Sa)

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Initial studies have pointed to a different segmentation scheme for Vodites

Followers

Early Adopters

Innovators

Sales

Time

Typical segment size evolution over time

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Sonite & Vodite customers purchase through three distinct distribution channels

Small stores not necessarily organized in chains Located close to their customers and providing a high level of

service and technical support Broad product line including high-end products.

Specialty Stores

Operate on a low-price, high-volume basis Lower level of service than in speialty stores Depth of product lines usually restricted to a few units Distribute the cheaper, low-performance products

Mass Merchandisers

Includes web-only merchants and retailers websites Low but significant percentage of sales are done on the web High convenience as consumers shop from home Almost unlimited choice and easy comparison Likely to become more important in the next 5 to 10 years.

Online Stores

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Getting started

The Markstrat

World Managing your firm

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Your objective

Maximize your Stock Price Index You will have to optimize: Market share Sales growth Net contribution Cumulative net contribution R & D investments

.but the main objective is to LEARN!

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From Data to Strategy

You will need to do a certain amount of analysis before setting a strategic direction for your firm

Data Information Strategy

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Research studies provide market data. Your task is to prioritize, digest & interpret them

Consumer survey & consumer panel Distribution panel Semantic scales Multi-dimensional scaling (MDS) Market forecast Industry benchmarking Competitive advertising & commercial team Advertising and commercial team experiment Conjoint analysis

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Once your strategy is clear, you should make a number of tactical decisions each year

Marketing Mix Production planning Pricing Advertising & segmentation strategy

Commercial Team Size of commercial team Allocation across distribution channels Allocation across marketed brands

Market Research Ordering industry-wide market studies Ordering market-specific market studies

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Making Production Planning Decisions

A production plan must be submitted each period for each brand, taking into account: The potential sales for the brand The existing inventory at the beginning of the period The flexibility of the Production department

From one period to the next, production plans may be increased or decreased without any penalty Actual production levels are automatically adjusted in response to actual demand by plus or minus 20%

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Sample Production Planning Decisions

Potential sales

Beginning inventory

Production plan

Actual production

Actual sales

Lost sales

Ending inventory

Ideal Case

154,000

20,000

150,000

Reduced to 134,000

154,000

0

0

Pessimistic Case

154,000

20,000

100,000

Increased to 120,000

140,000

14,000

0

Optimistic Case

154,000

20,000

200,000

Reduced to 160,000

154,000

0

26,000

Market Demand

Initial Situation

Your Decision

Production Action

Final Situation

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Competitors

Order-book

Industry

Estimating lost sales

Comparing purchase intentions with market shares at the end of the period can give you a feel for how many sales you have lost

Purchase Intentions

Market Shares

Sales Lost to

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Brand prices must be set once a year

You set the Recommended Retail Price in $ You should take into account The margin of the distributors The discounts made by some channels

Sample prices and contributions, assuming a pricing decision of $400 and a transfer cost of $125

Specialty Stores

Mass Merchandisers

Online Stores

Average Discount None 10% $40 5% $20 Actual retail price $400 $360 $380 Distribution margin 40% $160 30% $108 30% $114 Selling price $240 $252 $266 Transfer cost $125 $125 $125 Unit gross contribution $115 $127 $141

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Each firm receives a marketing budget for the coming period

The budget amount is based on the previous periods performance

Bud

get

Advertising Advertising Media Advertising Research

Commercial Team Operating costs

Research & Development Development budgets

Market Research Cost of studies

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Understanding Brand Contribution

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Understanding your Company P&L

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The simulation starts at the end of the initial period

.

. The new management (you!) make decisions for

the next period

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The decisions for the first period are limited in scope

Your team can get familiar with Markstrat Gather information Do not make any major changes in your firm's operation Do not introduce new brands, modify or withdraw existing ones Do not start R&D projects Do not give perceptual objectives for advertising

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Organize yourselves and manage the group process

Time pressure

Conflicting opinions

Information overload

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The Markstrat

World Managing your firm

Getting started

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Starting a working session Direct access

You may set up a shortcut in your favorite links to : http://70.34.194.228/WebApp_MarkstratWeb/PrepareHome.aspx

Enter the information given by your

professor

Browse the ANALYZE menu to review the available reports and studies

Start from here

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Click one of these images to open

the corresponding report or study

You can access all decisions on the Decision Home

Start from here

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Choose a name for your firm

It must start with the initial of your firm and

be 8 character long maximum

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Marketing Mix decisions should be entered for each brand

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Your marketed

brands

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The sales force is allocated across distribution channels and brands

Introduction to the Markstrat Challenge - Part I

Buying market research studies will help you make information-based decisions

The cost of each study is given here

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Check your budget at regular intervals

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Click here to check your budget

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Check your errors & warnings at regular intervals

Click here to check your messages

ON YOUR MARKS, GET SET, GO!

Respect the deadlines

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The Markstrat Challenge IWelcome to Markstrat Congratulations for your new position!Your role for the next 10 yearsSlide Number 4The Markstrat WorldUp to 6 competitors fight in this marketEach firm can compete in up to two product categoriesSonite brands are already marketed, each characterized by 6 main attributesNo Vodites exist yet. Experts believe that they will be characterized byIt is easy to recognize the origin of the brands from their namesSonite consumers have traditionally been classified into 5 segmentsInitial studies have pointed to a different segmentation scheme for Vodites Sonite & Vodite customers purchase through three distinct distribution channelsSlide Number 14Your objectiveFrom Data to StrategyResearch studies provide market data. Your task is to prioritize, digest & interpret themOnce your strategy is clear, you should make a number of tactical decisions each yearMaking Production Planning DecisionsSample Production Planning DecisionsEstimating lost salesBrand prices must be set once a yearEach firm receives a marketing budget for the coming periodUnderstanding Brand ContributionUnderstanding your Company P&LThe simulation starts at the end of the initial periodThe decisions for the first period are limited in scopeOrganize yourselves and manage the group processSlide Number 29Starting a working sessionDirect accessBrowse the ANALYZE menu to review the available reports and studiesYou can access all decisions on the Decision HomeChoose a name for your firmMarketing Mix decisions should be entered for each brandThe sales force is allocated across distribution channels and brandsBuying market research studies will help you make information-based decisionsCheck your budget at regular intervalsCheck your errors & warnings at regular intervalsON YOUR MARKS, GET SET, GO!