Student Advice Archives

Student Success Stories: Peter Johnson from Des Moines Area Community College

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Meet Peter Johnson, an Intro to Business student from Des Moines Area Community College. He managed to land the Top 7 spot in the MikesBikes Introduction Hall of Fame last Fall.

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.

MikesBikes Intro Hall of Fame

MikesBikes World Champs 2018 First Place Winners

2018 MikesBikes World Champs Winner: Whatever-Go from University of Auckland

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We have interviewed the 2018 MikesBikes World Champs winner, Whatever-Go with Wiput Tantulaphongse, Yijing Tang, Meiyicong Lin, Zhen Peng and Fengkai Han from University of Auckland. They have also managed to achieve the second highest Shareholder Value from the past 9 MikesBikes World Champs!

In this interview they talk about their experience in the simulation, their decision-making process, strategy and advice to future students.

Smartsims: What is your decision making process within the simulation and in the competition?

Whatever-Go: First of all, we look at the information in the Scenario Tab then we discuss about the strategy of the investment. The decision was based on the forecast market volume and the expected market share of our team. The expected market share is derived from the advertising expenditure and the target price. Moreover, we calculated the capacity needed to produce the expected amount of bikes two years in the future. The last decision made on the financial aspect. We simulated cash flow analysis and expected equity in the next rollover, so, we had the rough idea of how our cash on hand would be, and the likelihood of achieving that target. All of the decision made was influenced by the forecast of competitors’ decision as well.

Smartsims: What was your strategy going into the simulation?

Whatever-Go: Our strategy is to be the market leaders who produced high quality products with reasonable price. This strategy needs a thorough analysis of every aspect including marketing, product development, financing, and production as a whole. We had to understand the risk of each decision made in the particular rollover. We invested heavily in product development and advertisement in the first three rollovers because we expected to secure the highest market share earlier than our competitors. The forecast of the cash balance was really important to understand the sensitivity of financial information.

For example, if the expected market share change by 1%, we need to know how this would affect the ending cash balance. So, we can prepare the financing strategy whether we should take debt or equity financing. In the middle of the competition, we focused on optimizing the operation activities and maintaining a reasonable market share regardless of the price of products. We estimated the contribution margin of each product to ensure that every single product lines made the profit the team.

Every rollover, we aim for the highest profit which is the ultimate goal of a business. Moreover, we also focused on giving the dividend to shareholders. For the last two rollovers, we invested in investor PR to help our SHV and tried to maintain the investor PR index at 1 which is the optimal point.

Smartsims: What challenges did you face? How did you overcome these?

Whatever-Go: The most challenging part is the first three rollovers.

First rollover: We were not sure what the price of the Adventurer bike would be. If we set the price too high, it would lead to having a low profit in the following rollover. If we set the price too low, we could end up with loss sales which means loss of profits. In addition, we had to come up with the strategy for our product development. We had to guess which market to place the bike into. Finally, we decided to develop Adventurer and Kids bikes. We made the decision based on the profitability of Adventurer in the long run because we can double the profit of the Adventurer segment by investing 2-3 million. For kids segment, we had the assumption that most of the competitors would develop Racers. We decided to take a risk in developing a product in the Kids segment. The assumption in that moment was to take 30%-50% of kids market and gain a huge amount of profit rather competing in the “red ocean market” of Racers segment.

Second and Third rollovers: It was challenge to guess the competitors’ strategy. We had to estimate and monitor changes in price, awareness, PR, and quality of our competitors’ product. This helped us to understand the trend of each competitors and we adjusted our plan accordingly.

MikesBikes World Champs 2018 First Place Winners

For both situations, teamwork is the answer to overcome all of these challenging issues. The more we share to the team, the more solutions we came up with.

Smartsims: Was there anything, in particular, you did that you think helped to prepare yourself?

Whatever-Go: Cash flow analysis, cash balance sensitivity analysis, product development plan (for the whole simulation period), and the most important part is to understand how advertising, operations, finance and product development are linked together, and how the simulation software works. Read the Players Manual!!!

Smartsims: What do you think of the business simulation?

Whatever-Go: The simulation needs comprehensive decision making method.

This is one of the best activities we have done so far throughout the course.

MikesBikes shows every single element in the accounting perspective such as balance sheet, cash flow statements, statement of change in equity, and the costing information for management accounting. This is the good experience for management students so far.

Smartsims: Comments on your experience in your course simulation and with the MikesBikes World Champs

Whatever-Go: We had fun in the course and found that in MikesBikes World Champs is far more challenging because of the additional rules such as the limitation of numbers of development in a roll.

Smartsims: Advice to future students

Whatever-Go: Focus on your business strategy, set the target, think about the plan to achieve the target, adjust your decisions based on the business environment, focus on every aspect equally (advertising, operations, finance, R&D) because each decision supports each other and contribute to your overall Shareholder Value.

 

2018 MikesBikes World Championship Results

MikesBikes World Champs: Past Winners

Sunil Abinandan's Smartsims Journey from student to employee

Student Success Stories: Journey from a MikesBikes Business Simulation Student to a Smartsims Employee

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Get to know the latest addition to the Smartsims Team, Sunil Abinandan. He shares his experiences doing the MikesBikes Advanced simulation as a student, mentor and how these successfully helped him land the job here at Smartsims!  Continue reading Student Success Stories: Journey from a MikesBikes Business Simulation Student to a Smartsims Employee →

Music2Go Inventory Costs

Question of the Week: What are the Inventory Costs in Music2Go Marketing Simulation?

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There are two types of inventory costs in Music2Go.

Inventory Holding Cost

Each year all firms are charged 3.5% of the value of their average closing inventory for inventory holding costs to cover the cost of warehousing etc.

For instance, if you have 1 million units of unsold stock at the end of the year at a cost of $40 per unit, then you have $40 million of inventory which will cost:

3.5% *$40 million = $1.4m in holding cost

Inventory Disposal Loss

If a firm updates a product with a new design or abandons it altogether then all existing inventory is dumped at 93.5% of what the firm paid for it.

Example:

$1 million of inventory would be dumped for $935K giving a loss of $65K.

You can gather some valuable market research from looking at the figures for your competitors. Firms that have no inventory holding costs have stocked out, because they are under forecasting demand for their products. Firms with large inventories are over forecasting demand. If you see any inventory disposal costs, then you know that your competitor has either updated an existing product’s design or abandoned one.

Related Articles:

How to Set Retailer Price and Retailer Margin in Music2Go

Improving Total Marketing Contribution

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  • Contact us here.

Reference: 

This Photo by Unknown Author is licensed under CC BY

AdSim Advertising Simulation by Smartsims Industry Benchmark Report

AdSim Advertising Simulation Report Guide: Industry Benchmark Report

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What is the Industry Benchmark Report?

The Industry Benchmark Report is a summary of all firms’ Net Marketing Contribution reports so that you can benchmark yourself against your competitors as shown in the figure below.

In real life, this information would be difficult to obtain, but this report has been made available to you so that you can learn from your competitor(s).

There are several key parts of this report that you need to understand.

Sales & Gross Margin

Sales and Gross Margin in AdSim Advertising simulation

The Sales Revenue listed for each is the total wholesale sales revenue of all the firm’s products. The Cost of Goods Sold is the total cost of goods sold of all of the firm’s products that were sold, which is the number of units of a particular product sold multiplied by its manufacturing cost.

Gross Margin is the amount of profit that each firm made after the manufacturing costs were deducted.

You have no control over either the wholesale price or the manufacturing cost of your product, so your aim to maximize sales revenue by running the most cost effective advertising campaign that you can.

Product Marketing

Product Marketing in AdSim Advertising simulation

This section shows the combined Market Research, Agency Fees, Media Advertising, Customer Relationship and Marketing Communications expenditure for each firm.

The Evaluation Research expenditure lets you know how much market research your competitors are purchasing.

The Agency Fees let you know whether your competitors are using an Agency or not and how much it is costing them.

The Media Advertising expenditure allows you to see how much money your competitors are spending on Advertising, but now how they are allocating it to each media type.

Customer Relationship and Marketing Communications expenditure lets you know how much your competitors spent on implementing their selected options.

Net Marketing Contribution

Net Marketing Contribution in AdSim Advertising simulation

Net Marketing Contribution is the amount of profit remaining after manufacturing (cost of goods sold) and marketing expenditures have been deducted. The only costs still to be deducted are other functional overhead costs for your firm, e.g. finance, administration, etc.

Net Marketing Contribution is a measure of how profitable your firm is as a result of its strategic marketing plan. There is only one way that you can improve it, increase your Sales Revenue per dollar of Marketing Expenditure.

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MikesBikes Introduction Report Guide: Market Summary

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What is the Market Summary Report?

The Market Summary Report is a market research report giving a side-by-side comparison of all the products currently being sold in the market.

MikesBikes Introduction Market Summary Report

8 Key Pieces of Information

Sales

Sales is simply how many units the particular product sold last year.

Retail Price

Retail Price is the recommended retail price that each firm set for their product(s). You need to remember that the wholesale price is retail price minus the retailer margin, so it’s possible that a cheaper product than yours might have a higher wholesale price if that firm has lower retail margins.

Awareness

Awareness is a measure of how many consumers in that segment are aware of your product due to your corporate brand advertising and product advertising.

An awareness rating of 0.50 means that 50% of the consumers in that segment are aware of your product. When trying to raise the awareness level of your product(s), you need to pay attention to making sure that you are targeting your budgets to the media types that the particular segment watches the most.

Public Relations (PR)

PR is a measure of how many consumers in that segment have a “good” public relations image of your product due to your PR expenditure. When consumers read bike magazines you want them to see your product being reviewed and talked about and that is what your PR budgets are for. A PR rating of 0.40 means that 40% of the consumers in that segment have heard some good PR about your product.

Distribution

The distribution rating is a measure of how much distribution coverage your product has. A distribution rating of 0.65 means that 65% of consumers in that segment will find your product in a store they regularly shop at.

The only way to improve your distribution rating is to convince more stores to stock
your bikes

Quality

The quality rating is a measure of how many units of your product are returned under warranty. If approximately 2% of your sales are returned under warranty then your rating will be approximately 0.50, but if you can reduce it to approximately 0.3% of your sales being returned under warranty then your quality rating will rise to 0.90. In MikesBikes the only control you have over quality is how much money you allocate to your quality improvement budget each year.

Delivery

Delivery is a measure of how often your retailers run out of stock of your bikes. A delivery performance rating of 1.0 means that your factory never stocks out of bikes, however if your factory stocks out of bikes this year, then next year your delivery performance rating will fall. The lower your delivery performance rating, the less likely that retailers will want to stock your bikes. However be careful, as some segments are more sensitive than others to stocking out.

Product Specs

The “product specs” rating is a measure of how close your product is to the segment’s ideal dimensions for “tech” and “style”. A rating of 1.0 means that your product is 100% what the segments wants, a rating of less than 1.0 means that it is not. As MikesBikes progresses you will be offered numerous product development projects that will improve the product spec ratings of your products, if your product spec ratings are lower than your competitors it means that they are spending more money on product development than you are.

Check out the last MikesBikes Intro Report Guide here:

Industry Benchmark Report

MikesBikes Intro Report Guide - Industry Benchmark Report

MikesBikes Introduction Report Guide: Industry Benchmark Report

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What is the Industry Benchmark Report?

This report is a summary of all firms’ Key Financial results, which you can use to benchmark yourself against your competitors.

In MikesBikes Introduction, this report is divided into four sections: Financial Results, Customer Satisfaction, Internal Results and Innovation Learning.

Financial Results

MikesBikes Intro Financial Results

There are two key variables that you need to understand in this section, Share Price and Shareholder Value.

Your Share Price is the current market price of one share in your firm; the main drivers of share price are your average earnings per share (EPS) and your D/E ratio. If you want to improve your Share Price then you need to keep improving your EPS and to keep your D/E ratio below 1.0.

Shareholder Value is a measure of how much value a shareholder has received from owning one share of your company from the moment you took over running your firm. So Shareholder value is the current Share Price, plus the accumulated dividends that you have paid with 10% compound interest.

Customer Satisfaction

Customer Satisfaction in MikesBikes Intro Most of the fields here should be self-explanatory. However, you need to be aware that the Distribution Channel support figures include both your Extra Support (sales promotion support) spending and the annual support cost of supporting all the retailers that currently stock your products. Distribution Information (Distribution and Branding > Reports tab) report details what those annual costs are.

So every firm that has at least one store stocking its products will be spending at least a couple of hundred dollars. To see what their sales promotion budgets are, view the Multi-Firm Retailer Margins and Extra Support report under “Firm Marketing”.

Internal Results

Internal Results in Mikesbikes intro

The main purpose of this section of the report is so that you can compare your production efficiency strategy with your competitors. Make sure to compare your wastage results and number of products. The lower the production efficiency budget and the higher the number of products (more setup time), then the worse a firm’s wastage value will be.

Innovation and Learning

Innovation and Learning in Mikesbikes intro

Monitor how much your competitor(s) are spending on product development, it means that they are either making their products cheaper to produce, more attractive to the market or both. If you let a competitor get a significant production cost advantage over you then they will easily win any price wars involving that product.

Need extra help?

Check out the Smartsims Support Center or contact us here.

Music2Go Marketing Factory

Question of the Week: Why did I receive a different number of units from what I ordered? | Music2Go Marketing Business Simulation

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In Music2Go you make decisions for an entire year, but your factory has a limited ability to adjust the number of units produced to try to meet actual demand during the year. This is called Demand Responsiveness.

Demand Responsiveness allows the actual number of units ordered to increase or decrease by up to 20% to meet the actual demand for your product.

For instance, if you ordered 1 million units of a product, then the actual number of units delivered could vary between 800,000 units and 1.2 million units depending on actual demand.

Product Contribution Report in Music2Go Marketing

In our example above, we ordered 1.9 million units of our Sonic product, but the Actual Units ordered was less than this at 1.5 million because the demand for our products was less than what we anticipated to sell.

Note: Most worlds have 20% Demand Responsiveness enabled, although your instructor may request this to be modified or disabled for your Multi-Player. 

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Music2Go Sales Promotion Screen

Question of the Week: What is Sales Promotion? | Music2Go Marketing Simulation

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Sales Promotion

Sales Promotion in Music2Go works by boosting your distribution coverage and distribution index. 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.

There are 6 types of sales promotion activities available to you to promote your
products and support your distributors:

  • Trade Shows
  • Salesforce Training
  • Premiums (Gifts)
  • Website / Social Media
  • Point of Purchase displays
  • Rebates

Each promotional activity has particular relevance to certain stages of the Product Life Cycle as outlined below. Note that the Distribution Coverage and Sales Promotion Market Research report will show the age and stage of product life cycle for every product on the market, as well as the Sales Promotion Rating and the Promotion Mix effectiveness.

Choosing a Sales Promotion Mix

Sales Promotion Mix in Music2Go Marketing

Remember that each of your products will progress through the Product Life Cycle starting in the Growth phase for new products, then gradually progressing through to the Decline stage over the next six rollovers.

Say we launch a new Sports product this period. This new product will start in the Growth phase of the Product Life Cycle. Then from looking at the Sales Promotion table (this can be found in the Player’s Manual and Market Information Report), we can see that our ideal Sales Promotion Mix for a new Sports product is:

  • Trade Shows: 20%
  • Sales Force Training: 30%
  • Premiums (Gifts): 20%
  • Website and Social Media: 15%
  • Point of Purchase Displays: 15%
  • Rebates: 0%

Total =100%

That was a simple example, but what happens in the second year that we sell this Sports product? The product will have 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 in the Sales Promotion table. That would give us an optimal Sales Promotion mix something like:

  • Trade Shows: 15%

(Ideal Growth = 20%, Ideal Mature = 5%)

  • Sales Force Training: 27%

(Ideal Growth = 30%, Ideal Mature = 20%)

  • Premiums (Gifts): 26%

(Ideal Growth = 20%, Ideal Mature = 40%)

  • Website and Social Media: 13%

(Ideal Growth = 15%, Ideal Mature = 10%)

  • Point of Purchase Displays: 17%

(Ideal Growth =15%, Ideal Mature =20%)

  • Rebates: 2%

(Ideal Growth = 0%, Ideal Mature = 5%)

Total =100%

Tip: 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.

Related Articles
Chossing an agency in AdSim

Question of the Week: Which Agency should I choose in AdSim Advertising Simulation?

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Agency Selection

The first key decision you need to make for each of your products is whether you will employ the services of an advertising agency to assist you with your media selection.

Four Agencies

Agency selection screen in AdSim

Internal Plan

The Internal Plan means trusting your own media selection ability and going at it alone, which often obtains far greater returns.

The default plan for each product is average at best. Approximately 30% of you promotion budget is being wasted on poor media selection. By carefully reading and analyzing the marketing plan and market overview/research for your product’s target segment, you should be able to greatly improve the effectiveness of your promotion budget.

TV Magic

TV Magic is a media-buying agency that specializes in producing TV advertisements and bulk purchasing TV advertising time.

TV Magic will suggest a TV advertising media plan that will be significantly better than following the default plan. They are less skilled at other media production/selection, but their suggested plans will be noticeably better than the default plan.

Print Works

Print Works is a media buying agency that specializes in producing print advertisements and bulk purchasing print advertising space.

Print Works will suggest a Newspaper/Magazine advertising media plan that will be significantly better than following the default plan. They are less skilled at other media production/selection, but their suggested plans will still be noticeably better than the default plan.

Radio Can

Radio Can is a media-buying agency that specializes in producing radio advertisements and bulk purchasing radio-advertising airtime.

Radio Can will suggest a radio advertising media plan that will be at least significantly better than following the fault plan. They are less skilled at other media production/selection, but their suggested plans will still be noticeably better than the default plan.

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  • You can receive an immediate answer to a number of commonly asked questions through the Smartsims Support Center
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