Being evaluated on shareholder wealth is significantly different from evaluation based on net profit, market share, or earnings per share.
You should aim to:
Maximize net profit
Minimize shareholder investment
Minimize risk (associated with high levels of debt)
Due to these multiple objectives, a small niche marketer consistently earning good margins and without much debt may outperform a large heavily-indebted firm with earnings several times greater.
Firms will need to carefully consider these objectives when developing their overall strategy, their marketing, operational and financial plans. Simply increasing in size will not necessarily lead to an increase in shareholder value. You should only invest money (for example in new plant, new product development, or on factory improvements) if you believe that the return on these investments will be greater than what shareholders could achieve elsewhere at the same level of risk (e.g. shareholders can earn returns of 8% by investing in a term deposit). If not, you should instead consider repaying debt, paying a dividend, or repurchasing issued shares.
Devon Palmer (pictured above), a student of Professor Harold Lowe from Nova Scotia Community College has previously used our MikesBikes Introduction simulation in his Business course. Upon completion, he was asked by Professor Lowe to also trial both Music2Go Marketing and AdSim Advertising simulations for his work placement.
The review below is written by Devon. He shares his point of view on the AdSim Advertising simulation and some advice on how to do well in the simulation. He also created a few videos on both Music2Go and AdSim business simulations, which you can watch at the end of his review.
“AdSim is a computer-based Advertising Simulation of the Digital Camera division of a Consumer Electronics Corporation. You get the opportunity to experience and understand many of the key decision required to plan and implement an Integrated Marketing Communications (IMC) Plan.
AdSim will give you the opportunity to have practical hands on experience at making critical advertising decisions and seeing the outcome in a live, interactive case study.”
The goal of the AdSim simulation is to maximize your Cumulative Net Marketing Contribution.
How do you do this?
The first step is renaming your firm. This is available to you both in Single-Player as well as Multi-Player. Being able to make this decision gives the simulation a personal feel, rather than just being “Company #12452”. Your two market segments that you get to advertise and sell your product to are the Existing and New markets. Unlike other simulations that allow you to have multiple products in multiple market segments, AdSim only has the one camera that goes into the two segments.
As this is the advertising simulation, your main contribution is the Advertising Plan. Your main goal is to set your advertising budget and allocate it among the five areas; TV, Radio, Magazines, Newspapers, and Interactive Digital Media. While other simulations, like MikesBikes or Music2Go, also give you this option, AdSim goes a step further allowing you to allocate within those five areas. This is more in-depth and a great addition, especially for an advertising class.
Within the TV advertising you may allocate to four segments, Network TV, National TV, Local Spot TV, and Cable TV. Even further, you can allocate your budget into the Network TV segment into six more segments. These range from Early Morning to Late Fringe times of day.
Newspapers have four segments as well, which include, General, Business, Tabloid, and Sunday.
You can also further allocate within the General segment to five geographical regions such as North and South East, North and South West, and Central.
Magazines have five categories that you can advertise in, Women’s Lifestyle, Men’s Lifestyle, Entertainment, Family, and News.
The Women’s and Men’s Lifestyle choice further breaks down into four more choices based on the age of the customer. These are, Youth 12-17, Adults 18-34, Adults 35-55, and Adults 55+.
Radio gives you six station formats to choose from, these are, Contemporary Hit Radio, Urban, Country, Rock, Adult Contemporary, and Newstalk.
The Country Station gives you the option of allocating your budget between the five geographical regions.
The Adult Contemporary Stations allocated between various peak listening times ranging from Morning Drive to Nighttime.
Finally, the Interactive segment is new and unknown in this simulation. It gives you two choices of allocation, Direct Mail and Internet. They recommend experimenting within this segment to see how effective it is.
After doing multiple simulations and seeing how the advertising plan selections work, I find that AdSim does it best out of all other Smartsims simulations I have used. The option to further allocate my budget into different areas is a great choice and would greatly benefit any other simulation. It is also very easy to use and understand as you just need to make sure your “pie-chart” equals 100%. Reading the reports for Chapter 2 of the Player’s Manual will put you in the right direction on how to effectively use each segment to their absolute best.
Another part of the AdSim simulation is the Agency Selection. Here you decide on either trusting yourself to choose your media selections in a custom plan. This is a high-risk, high-reward option in my opinion. As you may select the right numbers in the right segments, but if you don’t do that it can be disastrous. I recommend only using a Internal Plan if you do the research beforehand. The other three options for your agency include TV Magic, Print Works, and Radio Can. These have their obvious strengths in one area, or two in the case for Print Works, but are still better than the default plans for each segment. I recommend picking one of these three agencies as they will give you good results when used correctly.
This is where you pick how you want your digital camera to appear on the market, as well as who you want to target. You have four decisions to make in each of the four categories, Target, Benefit, Proof, and Personality.
To make these decisions all you have to do is click the one you want and then click “Apply.” Target is who you are targeting to sell your camera to – Professional, Amateur, Recreational, or Family. Then you select the Benefit of your camera, Simplicity, Small Size, Picture Quality, or Feature Packed. After selecting your Benefit, you will need to select the Proof, which are, Lens, Focus, Digital Chip, or Direct Printing. The final message you will convey to your customers is the Personality of your camera. The options include Simple and Reliable, Fun and Exciting, Precise and Efficient, or Thoughtful and Nostalgic.
There are reports you can read that give you an insight on which choices to make to maximize in your desired market. Like the other choices you are able to make, these are extremely easy to make and understand as its just a simple click to decide.
Customer Relationships is another feature made available during the simulation. The options for these screens are: CRM System, Warranty, Support, and Loyalty. When choosing your CRM System, you are given four options, to not have one at all, an Entry-Level, a Mid-Level, or a Custom system. These decisions require a bit more research than others, but by reading the chapter section about CRM, as well as the reports about it, will help you in making your CRM, if you choose to have one.
The Warranty selection give you the choice of what kind of warranty you’d like to offer to your customers: 90 days, 180 days, 1 year, or 2 years. Support is how your customers will go about fixing any issues with the product. This is offered by a manual, a website tool, an email helpdesk, or a telephone helpdesk. The last option is the Loyalty program. You can choose not to have one, having a regular newsletter, a regular photo contest, or offering a Photo School. Information on making these decisions are available in various market research reports.
Later in the simulation, you will be given the opportunity to make the Marketing Communications decisions. This gives you the option of four choices, Sales Promotions, Trade Promotions, Sponsorships, and Public Relations.
Sales Promotions give the customer something a little extra when purchasing your product over the competitors, for example a bonus memory card. Trade Promotions are similar to Sales Promotions but give benefits to a Retailer instead. Sponsorships are a way to boost exposure for your product at a specific event. Public Relations is hiring PR consultants to attempt to promote towards journalist interest into writing reviews about your product. Again, there are reports you can read to give insight into which options to choose and when choosing the options, they are straightforward and simple to make.
Market Research reports are available to purchase every year, with new and updated reports available every year. The price of these reports vary from $25,000 to $50,000 and can give you very valuable information that can help you win. Some reports are more important to buy than others, while some are not worth buying at all, so make sure you know what you’re looking for before purchasing.
I feel the price for these reports are very worth it, especially if you were to purchase a report you didn’t need or felt didn’t give you the right information. There are reports that the Player’s Manual recommends purchasing, and I completely agree as the information that is given is highly useful in dominating the market, especially early on.
In conclusion, I highly recommend the AdSim simulation by Smartsims for any class or business looking for business simulations that have a focus on Advertising. It gives you the right amount of content where it feels complete and spreads it out evenly throughout the rollovers.
For me personally, my class at NSCC Pictou would have greatly appreciated using this simulation during our first semester in our second year, as we had both an Advertising class as well as a Market Research class. It would have fit perfectly in our schedule as well as setting us up for our final semester where we challenged our Management counterparts to the MikesBikes simulation.
I give this simulation a 9.5/10 and again, highly recommend it to any classes or business that would like to use a business simulation to teach the fundamentals of advertising and its affect on the business.
Here are the videos that Devon created for both AdSim and Music2Go:
The quote above by Ruben Chavez of Think, Grow, Prosper acknowledges the impact of experience as the best way to learn. This holds true with one of our students, Sharon Capps from University of St. Mary. She’s currently using the MikesBikes Advanced simulation in their Strategic Management course taught by Lisa Parrott.
The review below is written by Sharon. She shares her insight and lessons she has learned from the simulation.
There are some real benefits from this short-term and intense competition between our teams. We do not have time to get complacent, we are doing two rollovers a week now and constantly have to be reevaluating and making new decisions. We are also establishing the brand for our company through our strategic focus.
This game makes us become self-aware of what we do not understand and need to review so we can be more successful in the next round. What changes we make in one area and how they may impact another area positively or negatively.
Each of us are also discovering our strengths within our teams and what we can focus on that sets our company apart. We are also learning how to better evaluate our competitors and analyze what data we can see from the other teams. This helps us make calculated decisions based on what we think their next move may be and plan accordingly.
We are also learning to plan far ahead to anticipate growth and expansion, not just focus on the rollover within the next few days. Another business mainstay we are strengthening is to always focus on what our customers need and want (Kittaneh, 2015).
We are lucky within this game because we get a lot of helpful data in this area, but our teams have to constantly look at where our bikes fall on the perceptual maps.
Adrian Cenon is a Master’s student and MikesBikes Mentor from The University of Auckland. He was also recently invited by Audrea Warner, professor at the Graduate School of Management to share his experience using MikesBikes Advanced in the Managing People and Organizations course. We thought it would be a great idea for Adrian to share his experience with all of you.
Get to know Adrian more in our interview below as he shares his MikesBikes experience, the challenges and lessons he learned from the simulation.
Tell us about yourself
Adrian: I’m currently a Master of Management, major in International Business student at The University of Auckland. I have finished a degree in Economics and Education, major in History at De La Salle University.
I have worked in Singapore as an Organizational Development Analyst and as a Global Learning Support Executive. In addition, I was also a Training and Research Officer.
What was your first impression about using a business simulation in the course?
Adrian: I was impressed that my first course in University of Auckland recognized that learning is enhanced by connecting the management theories discussed in class with the dynamic interactions within a team. As well as how they respond to real-life challenges and scenarios incorporated in MikesBikes. Through my previous work experience, I have been an advocate of the 70-20-10 model (by Eichenger and Lombardo) that has been widely used by management consultants and talent development professionals.
Furthermore, I heard a lot of feedback from the previous Cohort that the MikesBikes experience will be a challenging, fun and effective way to enhance my business acumen and leadership skills.
Did your impression of the simulation change as the course progressed?
Adrian: Yes, the whole learning journey was more immersive and challenging than what I expected. The level of competition among teams was intense and it required a lot of effort and focus to adapt our strategies based on market trends so we could gain an edge. I also didn’t expect that it would elicit extreme levels of happiness, excitement and sometimes disappointment as you view the results after each rollover.
How was your experience working on the simulation on your own and eventually with a team?
Adrian: I would say that MikesBikes engaged my team on a level where we felt that we were running our own company and were accountable for our roles. When I reflect on the experience, I am extremely proud of how our team performed because of four reasons:
We were genuinely passionate about our brand – WindChaser, and how it stood for “Chasing the Right Things” – identifying what is important and chasing it with the best of our abilities. Everyone participated in formulating our Team Goals and Key Performance Indicators (KPIs) and strategies.
We had a great team culture and believed in the capabilities of one another. The rigor of analysing various reports (eg. Marketing, Finance, Manufacturing, Research and Development and Human Resources), making decisions, and competing with other teams strengthened our realization that we could only achieve our goals if we functioned as a high performing team. We learned to foster interdependence by aligning our actions with our core values of Passion, Accountability, Respect and Trust.
Third, we dealt with conflicting priorities the right way and demonstrated integrity in how we competed with the other teams. Our team was aware of numerous “strategies” that we could pursue to get ahead and maximise our Shareholder Value (SHV) at all costs. But just like in the real world, you are sometimes faced with a choice to focus on the bottom line or preserve your reputation and relationship with others.
For example, heading to the final rollover, we had the option of extracting as much capital from our partner firm/ subsidiary. The problem was that applying this tactic would hurt their final SHV. Instead of taking full advantage, our team agreed to a reasonable rate with our subsidiary to ensure a sustainable SHV growth for both teams. In the end, this decision came at the expense of our team losing the European market by a narrow margin. However, we didn’t treat this as a setback because we stayed true to our values and enhanced our reputation and credibility among our peers.
4. Even though we didn’t win our market, we believed that the MikesBikes experience brought out the best in each one of us. As the CEO, I learned the importance of empowering your team members to perform their roles but at the same time providing guidance and support when they experience challenging situations. I am grateful to my team for believing in my capabilities and trusting me that we would become better individuals as a result of this learning journey.
Please share your experience in the course as a whole and how the simulation added value and impacted your learning.
Adrian: I consider MikesBikes as an effective platform that maximised the learning from the “Managing People and Organisations” course. The different scenarios and complexities provided various opportunities. I was able to utilise my previous work experience and theories I learned in class, and apply them in a simulated business environment.
The experience took me out of my comfort zone as it brought a lot of high and low points which required me to reflect and adapt to changes to effectively lead my team. I consider the lessons learned from the simulation and the course as vital “Deep Smarts” which I would be able to leverage when I continue my career in Organizational Development and Talent Management.
What advice would you give your past self (go back to the time when you were still doing the course and the simulation)? What do you wish you knew back then when you were doing the simulation?
Adrian: I would prefer not to give my past self any advice about the course and the simulation. I believe that the process of dealing with uncertainty provided the best opportunity to learn and more importantly, build character. There were several instances where our team spent a lot of time in figuring out how to drive our strategies because we recognized that a wrong move can have significant consequences. Ultimately, the ability to handle pressure, evaluate the effectiveness of decisions, and manage our mindset proved to be excellent learning points which are applicable in the real world.
Meet Sajjad Husain Arastu, a Master’s student in International Business from The University of Auckland. He is currently sitting in first place in the Top 20 MikesBikes Advanced Hall of Fame. His $1,014.11 Shareholder Value has been unbeatable for two consecutive years now. Since then, he has been consistently trying to beat his own record. This reminds us of a saying from a Canadian based philosopher and entrepreneur, Matshona Dhliwayo:
“To be a champion, compete; to be a great champion, compete with the best; butto be the greatest champion, compete with yourself.”
The article below is written by Sajjad. Let’s get to know him more as he shares his MikesBikes Experience with us.
The beginning of my journey
I’m Sajjad Husain Arastu. I’m from India. I came from an engineering background specializing in Marine Engineering. I was fortunate to get an education in top universities in three different countries namely: India, Malaysia and New Zealand.
Coming from a technical background, I soon realized that the main decision-making ability lies with people who understand business. This motivated me to come to New Zealand and pursue a Master’s in International Business. I wanted to expand my knowledge further, learn the commercial aspects of business and to grow in the industry. The purpose of selecting this course was to gain deep knowledge on the commercial side of the International Business – focusing on International Trade, Logistics, Global Operations and Consultancy. In addition, I also wanted to gain skills in managing people, operations, research and development, planning and strategy in complex business environments.
My first course in this program was Managing People and Organisations, which introduced me to MikesBikes Advanced. It was the most exciting part of my learning. I want to thank Professor Darl Kolb for teaching this course and giving us the ability to run our own companies.
When I was doing my Marine Engineering course, I had an experience using a simulation to design ships and learn how to calculate. I never knew that we could run a business using a simulation.
The idea of using a business simulation was very new to me. I wanted to try and understand it in order to help me make decisions in a real business. I came from a technical background with literally no experience in business, so it was tough for me to understand the different business functions.
We first tried the single-player version for a week and then progressed to form our teams, where we managed our companies in the multi-player version. I was selected as the CEO of my company, Cycle planet, because I managed achieve a Shareholder Value (SHV) of $200 in my single-player version.
Competing against our friends and running my own company was one of the most thrilling experiences for me. The MikesBikes Advanced simulation is a perfect combination of the human-machine interface, which makes use of technology to develop human thinking. This motivated me because, it was exciting as every decision is unique and brings a different outcome. It also gave me an ability to manage and learn from people by competing against their companies.
Invitation to MikesBikes World Champs
The best thing happened to me towards the end of the quarter. Smartsims sent an invitation to participate in the MikesBikes World Champs. I got excited because we were just playing among our friends and classmates, and now I’m given an opportunity to compete against other students from all over the world. I wanted to experience this and develop my understanding further, so I participated in the world championship.
In the world champs, there was a condition where we could not design more than two R&D (Research and Development) projects in a given year. This was something different from the scenario we do in the course. It required a new set of decisions and more strategic planning. My team and I made some mistakes with our strategy and our group ended up in the Top 14 worldwide, which was not bad but gave me more motivation to learn and master the simulation.
My Single-Player Journey to First Place
Using MikesBikes for around 10 weeks in the course honed my learning and understanding of business. I was also becoming more familiar with the simulation. After every rollover, I look at the Hall of Fame ranking. I wondered how people could get such high scores and what they did differently.
After joining MikesBikes World Champs, I decided to play with a target of getting in the Top 20 Hall of Fame. Since I have a technical background in marine engineering, I started to think like an engineer than a business person. I started optimizing my decisions to generate more profit. As soon as I realized I’m spending too much money, I needed to minimize my cost in all aspects of my planning and came up with a new strategy to enter the Hall of Fame. I tried and looked at my decisions very carefully and started optimizing my R&D, Operations and Marketing spend.
As an example, in my initial rollover, the cost of making one Adventurer bike inclusive of all costs was close to $260 which I optimized to as low as $97. This increased my profit margins. Additionally, I also adjusted my Operations, Advertising, Distribution and Finance decisions to reach a Shareholder Value (SHV) of $1,022 with an overall net profit of $73 million which landed me the top spot in the Hall of Fame.
Impressions on the simulation
When I was first using the simulation, I thought it is just like a game. However, that was not the case. I noticed that every aspect of the simulation is interrelated and it requires strategic planning in aspects such as R&D, marketing and operations. It also involved a lot of teamwork, because we make decisions that involve a lot of planning and some calculations. Some of the decisions in my initial rollovers were just based on trial and error. However, as the course progressed, they became more planned, calculated and forecasts were made more accurately. Working well in your teams is one of the keys to succeed in the simulation.
Value and impact of the simulation in my learning
I got a chance to work with a diverse group of people. I also realized that interaction with your team is necessary in order to share ideas with each other. Every member of the team has specific duties, which is essential to make collective decisions.
In MikesBikes, our firm needed to maintain profitability in order to increase our Shareholder Value over time. This can be achieved by proper planning, understanding the components of business functions and making informed decisions.
One of the main challenges we faced as a team revolved around making the right decisions as some of our members were not aware of some of the concepts. This created misunderstanding among us when analyzing the reports. Our main priority as a team was to learn and understand our roles and duties to strengthen our relationship with each other. To improve on this, we kept a record of all our previous decisions so that we can focus on modifying these and to achieve better results. In MikesBikes, we are dealing with competitive markets which were hard to predict. Every decision required a large amount of funding.
MikeBikes provided us with a very realistic platform, which is an essential part of my learning and development. As an individual and also as someone that’s part of a team, the simulation gave me an insight in every aspect of the business. It also gave me an understanding of the value of money and how to avoid overspending to maximize our output. The simulation has helped my development in the university.
I want to thank Professor Darl Kolb for always encouraging and motivating me to develop my learning in the simulation through his weekly stock reports. This report showed us how we are doing in class against our competitors.
Advice to my past self
If I were to go back and play the simulation again, I would improve and optimize my pricing and financial decisions. I have not not mastered these aspects yet. As an example, if I keep my prices too high, my competitors will take the market share by offering low prices. Additionally, if I drop my price, I will miss out on potential profits. I need to find balance between pricing my products and knowing when the best time time is to make financial decisions.
Using my MikesBikes Experience in LinkedIn
I want to be an expert in my field and want to grow in the industry. I worked day and night using MikesBikes to develop my learning and understanding of business. I think in this competitive environment, it is necessary to do something different and stand out in the eyes of employers by showing your potential.
I used LinkedIn to demonstrate potential employers that I have great abilities and skills, which I developed over time and would be a great asset to them if they provide me with an opportunity to work with them. It has been eight years till date, and my struggle to find a full-time job has pushed me beyond my comfort level to grab any opportunity to show employers my potential and worth. I believe LinkedIn can market my achievements to the world of employers.
What are the other common mistakes in Music2Go Marketing?
In Part Two, we’ll talk about the importance of reaching the right customers and how to better allocate your Sales Promotion Mix.
Here’s Part One of the article in case you missed it.
Mistake #4: Misunderstanding the Importance of Reaching the Right Customers
Not understanding this can be a costly mistake as it often leads to incorrectly assigning your Advertising Mix. This can have a negative impact on the demand for your products and can also lead to overspending. Meaning your firm’s profitability is at risk!
How do you know if you are spending your advertising budget inefficiently? Follow through this section, it will show you how to efficiently allocate your advertising budget.
Each market segment is sensitive to different dimensions. View the Market Information report.
How do I interpret this Product Dimension Sensitivities graph?
The best way to explain it is through an example. If you take the Standard segment, you’ll see it has a high sensitivity to Price. This means that an increase to your price (example setting the price to the maximum) is going to have a negative effect on your sales volume.
What these sensitivities mean is a change in any of these factors, will result in a proportionate change in the consumers’ demand for your product(s).
There are four media choices to develop your advertising mix on: Television, Newspapers, Magazines and Digital Media.
There are two substantial sources of information you can use to determine your optimal advertising mix for a given advertising spend: Advertising and PR Reach by Media Curve and Media Viewing Habits. Both information can be found in the Market Information report.
The best way to explain this would be to provide an example.
Example: Budget of $4 million on Standard Segment.
Option 1: 42% of the Standard Segment read magazines.
So our $4 million spend would reach approximately 90% (taken from the graph at a spend of $4 million) x 42% (Media Viewing Habits) = 37.8% of the Standard segment can be reached
Option 2: 85% of the Standard Segment can be reached via Digital Media.
So our $4 million spend would reach approximately 50% (taken from the graph at a spend of $4 million) * 85% (Media Viewing Habits) = 42.5% of the Standard segment
Option 3: But maybe we can do better than that still. What happens if we spend $2 million on Newspapers, and $2 million on Magazines?
If we spend $2 million on Newspapers, we could reach approximately 40% of Newspaper viewers and 58% of the Standard segment reads Newspapers. So we could reach approximately 40% (Media Viewing Habits) x 58% (taken from the graph at a spend of $2 million) = 23.2% of the Standard Segment.
If we spend $2 million on Magazines we could reach approximately 50% of Magazine viewers and 42% of the Standard segment reads Magazines. So we could reach approximately 50% (Media Viewing Habits) x 42% (taken from the graph at a spend of $2 million) = 21% of the Standard segment.
So, together our $4 million spent half on Newspapers and half on Magazines would reach approximately 44.2% of the Standard segment, which is obviously a better use of our Advertising budget than the first two options.
As you can see, with the same budget, but a different allocation towards each media channel can make a huge difference in the amount of consumers you can reach.
This is only an example of good and bad marketing mixes. This is far from the best mix you can make. We suggest playing around on different Marketing Mix and see what works best for your strategy and budget.
Mistake# 5: Inaccurately Allocating Your Sales Promotion Mix
Your Sales Promotion strategy will need to vary with the Life Cycle of your product. For instance, Trade Shows and Sales Force training will be important a new product launch, bur progressively less so as the product ages. Your existing product will be in the Mature phase of its life cycle for your first Sales Promotion decision (Sales Promotion decisions are available after the 1st rollover).
It is important that you get your Sales Promotion Mix right, because it helps boost your distribution coverage and distribution index. In addition, some segments are particularly sensitive to Distribution, such as the Standard Segment.
There are 6 types of Sales Promotion activities available to you to promote your products and support your distributors:
Point of Purchase Displays
So, how do I choose a Sales Promotion Mix for my products?
Remember that each of your products will progress through the Product Life Cycle starting in the Growth phase for new products and then gradually progressing through to the Decline stage over the next six rollovers.
Say we launch a new Youth product this period. This new product will start in the Growth phase of the Product Life Cycle (See Market Information Report > Sales Promotion). Then from looking at the tables above, we can see that our Ideal Sales Promotion Mix for a new Sports product is:
Trade Shows – 15%
Sales Force Training – 25%
Premium (Gifts) – 5%
Website and Social Media – 25%
Point of Purchase Displays – 25%
Rebates – 5%
Total = 100%
That was a simple example, but what happens in the second year that we sell this Youth product? The product will be moved from the “Growth” phase to “Growth – Starting to Mature.” So the optimal Sales Promotion mix will be 1/3 of the way between the ideal Growth and Mature figures in the Sales Promotion Table. That would give us an optimal Sales Promotion mix something like:
You should buy the Distribution Coverage and Sales Promotion Market Research report for detailed information on the Sales Promotion Rating and Stage of Product Life Cycle for all firms in the Industry.
“During a research experiment a marine biologist placed a shark into a large holding tank and then released several small bait fish into the tank.
As you would expect, the shark quickly swam around the tank, attacked and ate the smaller fish. The marine biologist then inserted a strong piece of clear fiberglass into the tank, creating two separate partitions. She then put the shark on one side of the fiberglass and a new set of bait fish on the other.
Again, the shark quickly attacked. This time, however, the shark slammed into the fiberglass divider and bounced off. Undeterred, the shark kept repeating this behavior every few minutes to no avail. Meanwhile, the bait fish swam around unharmed in the second partition. Eventually, about an hour into the experiment, the shark gave up.
This experiment was repeated several dozen times over the next few weeks. Each time, the shark got less aggressive and made fewer attempts to attack the bait fish, until eventually the shark got tired of hitting the fiberglass divider and simply stopped attacking altogether.
The marine biologist then removed the fiberglass divider, but the shark didn’t attack. The shark was trained to believe a barrier existed between it and the bait fish, so the bait fish swam wherever they wished, free from harm.”
What do you think is the moral lesson of this story?
The lesson here is many of us give up after experiencing failures. Like the shark story, we believe that if we were unsuccessful in the past, then we will always be unsuccessful. We continue to see barrier in our heads, even when there are no “real” barriers.
So you are probably reading this article because you want to get out of a situation where you have made mistakes in the simulation and want to fix it, right? Good on you for crossing that barrier!
Mistake #1: Not purchasing Market Research Reports
We cannot reiterate enough how important this is. Many students want to “save” their budget and invest it in other areas in the simulation. However, knowledge is power and by investing in these paid reports, you are making more informed decisions.
Mistake #3: Misunderstanding the Importance of Pricing Products Correctly
Price is usually a key determinant of demand and is the most critical component to maximizing your revenue. Therefore, carefully thinking about your Pricing strategy is important as this would have an impact on the demand for your products.
The article below is written by one of our previous students, Michael Stewart from Boston University. Michael took the Managing a Growing Enterprise course with Professor Greg Stoller and used MikesBikes Advanced as part of this.
Upon completion, he had the idea to incorporate MikesBikes Advanced into their program for this semester’s pledge class in their business fraternity, Delta Sigma Pi. The purpose of their fraternity is to foster the study of business in universities and to promote the association of students studying business for their mutual advancement through research and practice.
Michael is in charge of instructing the pledge (underclassmen students at Boston University) as they seek brotherhood within the fraternity. He felt that the simulation would be academically enriching and will create some level of competitiveness and enjoyment.
MikesBikes Advanced Experience in the Managing a Growing Enterprise course
This past fall, I was introduced to MikesBikes Advanced in my Managing a Growing Enterprise course at Boston University. This class was for students interested in pursuing Entrepreneurship and much of the lesson plan was focused on how to strategically position a new company in a competitive market.
Our Professor, Gregory Stoller, used the simulation to further our understanding of class material, as well as a tool to keep students engaged outside of the classroom.
MikesBikes Advanced is an online business simulation that offers students the opportunity to run their own company, while managing all the key functional areas of a business. It is an interactive tool that applies the basic concepts of business in a real-life context. Through the simulation, we received hands on experience making marketing, operations, product development and financial decisions.
After introducing the simulation to us and dividing us into teams, Professor Stoller assigned us our first deliverable; the Strategic Plan.
Our Strategic Plan set the guidelines of our businesses and assisted teams as they set variables for the first few weeks of the simulation.
The plan outlined our company’s mission, corporate and functional strategy and the key metrics that would be utilized to measure our company’s performance. The plan allowed for teams to show how they were going to position their companies relative to others in the virtual industry and how they were going to structure their spending in each functional area to achieve this position.
My classmates and I understand how much work would be involved in this assignment and found ourselves working on plans late into the night and often overnight into the morning they were due. This shows the complexity of the simulation and all the variables that you must stay apprised of over the course of the weekly rollovers. Once the first rollover hit, we still found that we failed to account for many of the variables that play into the shareholder value, which happened to be the most important metric in MikesBikes.
As the weeks passed, we saw the virtual market begins to take shape as teams began to adapt their strategies. Some teams chose to launch products into all possible market segments, whereas others held tight within only a few segments. By the end of the simulation, the teams that diversified their product found the most success. With only a few weeks left, teams who were behind did not have the time needed to launch new products and replicated the success of others. The lagging teams resorted to paying dividends and manipulating other financial variables in order to inflate their shareholder values in the final hour.
At the very end of the semester, each of the teams presented their performance and the lessons they learned from their experience in the simulation. Each team spent time discussing some of the mistakes they made early in the simulation and how they could have operated differently. The improper use of cash was a factor that impacted all the teams. Almost all the teams sat on heavy cash balances and did not use resources to reinvest back in their operations. It was not until the end of the simulation that we all began to pay dividends, buy back equity and pay off debt.
The simulation gave the class a more competitive feel than other business classes. Every Wednesday night my classmates and I would stay up to see who was on top after the weekly rollover. We spent hours trying to find the best ways to position our respective companies, may it be targeting a different segment or possibly improving product quality. We knew that if we found ourselves at the bottom of the rankings on Thursday morning, we would be subjected to some friendly banter among others in the class. As a rather small class, a shared bond developed within the group. It also helped that most of us had pre-existing relationships from our shared brotherhood in the business fraternity, Delta Sigma Pi.
Delta Sigma Pi (DSP)
Our fraternity, Delta Sigma Pi, or more fondly known as “DSP”, was organized in 1907 to bring students of commerce together, develop their skills and prepare them for the world of business.
Since its origin, DSP has attracted thousands of students to join its organization by emphasizing its four pillars: Brotherhood, Service, Professionalism and Scholarship. Along with a sense of identity, these pillars help guide DSP chapters across the country as they help mold young men and women into business leaders of tomorrow.
The shared brotherhood is also why we all found ourselves together in Professor Stoller’s class. The five of us all have interest in entrepreneurship, a few having some prior experience running their own companies. We were all driven by our shared desire to practice our business skills in an academic environment. Once a few of us signed up for Managing a Growing Enterprise, we quickly influenced others in the fraternity to join as well. I believe that this factor was what led to the simulation feeling so competitive – the fact that we wanted to have higher shareholder value than our brothers on the opposing teams.
Taking the class also opened our eyes to something that could be done to better our fraternity. Our chapter does not offer many outlets for our brothers to practice their business skills, work together in teams and compete against one another. We have been actively searching for different ways to accomplish this in the Spring 2019 semester. It is for this reason that we have decided to partner with Smartsims in order to share the MikesBikes simulation with our pledge class this spring.
After being introduced to MikesBikes this past semester, it became obvious to us that this could be a great tool to be added to our semester-long pledge program. Each semester, our new pledge class could take part in the simulation and practice their skills as they compete against one another. The simulation will provide the pledge class with an opportunity to better understand the functional elements that go into running a company.
MikesBikes Advanced at Delta Sigma Pi
Our plan is to run the simulation very similar to how it was conducted in Professor Stoller’s class. Of course, there will need to be many resources available to the pledge class as they will be less familiar with the functional areas of running a business as they are only underclassmen who have not taken some of the pre-requisite classes yet. We will address this concern by assigning advisers to each team and providing a two-week “ramp up” period before the first rollover.
Each team will work with the advisers to create Strategic Plans that will outline both their corporate and functional strategies. These plans will guide their decision making once the first rollover takes place. Advisers will continue working with teams throughout the semester and help guide them as they set variables that fit related to the simulation. The advisers will also help to further their understanding of topics such as trade-offs, competitive positioning, and other business-related activities. Since these topics are relative to almost every sector of the business world, these students will gain much value from taking part in this experience even if they have no aspiration towards running their own company.
The final deliverable will be a team presentation during which the pledges will talk about the lessons they learned and critical decisions that had the most impact on their performance. We hope this will be a reflective exercise that will also allow the pledges to practice speaking in business settings.
The winning team will be decided by both this presentation and simulation performance. The presentation will also be a tool for Administrators to review how to better implement the simulation in the future with pledges who have no prior entrepreneurial experiences.
As a fraternity, we are looking forward to seeing how we can further experiment with the MikesBikes Advanced simulation. We are certain that it will provide academic value to the pledge class. However, we are realistic in that we expect there to be some kinks given that this is our fist attempt implementing the simulation. We feel fortunate to have the opportunity to share this experience with the pledge class and hope it ignites an interest in Entrepreneurship.
Michael is currently running the MikesBikes Advanced simulation until April, so stay tuned for the next article featuring their pledges experience with the simulation!
We interviewed Peter to learn about his decision-making, strategy and what resources he used to help him succeed in the simulation.
What is your decision-making process within the simulation?
My decision-making process always began with reading the business reports to base my decisions off of. When looking over the reports, I would also take notice of what my competition was doing. Analyzing this information was very helpful in every new decision I made especially when expanding my product line. I would then adjust my numbers for production and available units for sale. Next, I would tend to my advertising in each market. I spent quite a bit of money on advertising, but it worked well for me. In addition, I invested in many company and product improvements such as efficiency and quality. When able, I would pay dividends and repurchase equity as well. For the most part, this decision-making process remained routine for me through each simulation rollover.
What was your strategy going into the simulation?
My strategy for the simulation was to increase shareholder value by boosting sales and maximizing profits. To do so, I wanted to grow my company by expanding the product line and by investing more money in advertising to grow my brand and gain a competitive edge. I knew I wanted to separate myself from the competition and an increase in advertising was my first step in accomplishing that.
How did you begin implementing that strategy?
I implemented that strategy by immediately increasing the money I spent on advertising. I paid attention to the market reports to allocate my advertising expenses effectively for each market. I also looked for ways to improve the products and company along the way. For example, I invested in efficiency and quality when given the opportunity to do so. Also, market reports helped me make tailor made product improvements according to the expectations of each corresponding market.
How did you familiarize yourself with the simulation?
I watched the instructional videos and looked through the various reports available. I took advantage of my practice time with the simulation. During this time, I was able to make decisions according to information I read in the reports and see how the results of my decisions would play out in the simulation. Seeing how these decisions would positively or negatively affect my business was very helpful.
How would you describe the competition?
I would describe the competition as a high priority. In my opinion, it is equally important to pay attention to what your competition is doing as much as it is to pay attention to what your own company is doing. You can definitely create competitive advantages for your business depending on what your competition is doing or not doing.
What resources did you pull on to develop your winning strategy which led you to the top of your course and then top in the Hall of Fame?
Utilizing the reports made available to me in this simulation was crucial in developing a winning strategy. The information they provide allowed me to refine my decisions along the way and improve the accuracy of those decisions. Also, keeping an eye on my competition proved to be more valuable than I had originally anticipated.
What challenges did you face? How did you overcome these?
Lost sales became a challenge for me on more than one occasion. Every time I expanded my product line, I incurred lost sales in each of the new markets. To correct this, I increased the number of units available for sale in each of those markets. Occasionally, I would have to buy more SCU to produce more units. Paying attention to my market share and future market demand helped me eliminate lost sales.
Was there anything in particular you did that you think helped to prepare yourself?
I think taking advantage of the practice time to learn about the simulation really helped me. Getting to know the reports available and the information they contain are advantageous in making solid decisions and taking informed calculated risks.
How has participating within a course which uses a business simulation to supplement their teaching materials helped you? What do you think of the business simulation?
I think it helped me in learning about and understanding how to read various business reports. It is important to know what information to look for when making any decision for your company. The interactive platform is a great way to experience making decisions for a business and seeing the outcome of those decisions.
Comments on your experience with the simulation itself
I really enjoyed my experience with the Mike’s Bikes simulation. Engaging in the simulation is an interesting and fun way to learn. It provided me with valuable tools and experience when addressing a company’s business decision making process. Being that every Mike’s Bikes experience is unique to that user, it is a simulation I would participate in again.
“The MikesBikes simulation combines elements of strategy, marketing, operations, product design and human resource management within a complex competitive environment. Besides the business and management aspects, the simulation provides a place for leadership to emerge as it did in these successful teams. I am always proud of all our simulation teams, but seeing so many of our students do so well on the world stage makes me immensely proud.”
– Professor Darl Kolb
Check out some of the photos from the final presentation: