Business Starter

DIAPO 1

Hello, we are company F : Fitness wear. As you probably know we are the team that won the game. From the very beginning we put a strategy in place and maintained it from the beginning of the game to the end of it. In this presentation, we will reveal the strategy we used to win .

We will explain in detail how we made our decisions and why we made them.

DIAPO 2

Let's talk about our strategy. We have adopted a low-cost leadership strategy.

This strategy consists of the following elements.

First of all, we produce shoes with a Style/Quality rating lower than the market average. This allows us to have low production costs.

Secondly, to keep our products attractive despite this slightly lower than average quality, we sell our shoes at a price slightly below the market average.

This has the consequence of reducing our profit margin.

Therefore, to compensate for this lower profit margin we aim to sell a very large quantity of shoes.

In order to successfully increase the demand for shoes and thus flood the market with a large number of shoes, we have to invest a lot in advertising, and we have to offer a large number of models. Even if we create a lot of marketing costs and decrease our profit margin by selling at low prices, producing shoes with a low Style/Quality rating remains an essential point because we want to keep our production costs low as we produce a lot. All this works well together because these decisions create a virtuous circle between them.

So, to summarize our strategy, we accept to have a lower profit margin in exchange for selling a very large quantity of shoes. We aim to become a volume retailer with the biggest market share.

On the strategic map, our goal will be the bottom right corner. To give you an example : If the game was in the car industry, we would be a company like Volkswagen by selling a large number of low to middle end cars with a lot of models. The opposite of our strategy, in the top left corner would be a company like Ferrari by selling a small number of very high end cars and very few models.

DIAPO 3

Now we will show you how we have implemented our strategy. First of all, we didn't get any direct results in the first two years, even though we had already obtained a 4th place in year 11 and a 3rd place in year 12.

There are several reasons for this slow start:

First of all, we had no previous data concerning the decisions of our competitors.

But the most important thing is that during the first two years we made many investments that were not immediately profitable, but later in the game.

Indeed, we first invested a lot to increase our production capacity (as suggested by our strategy). As you can see in the tables, by increasing our production capacity from the very beginning of the game, we were already able to produce 50% more than the second team with the highest production capacity (Team I). In terms of production capacity, we were already the leaders. However, in year 12, even though we had already increased our production, the demand was not yet keeping up and we could not use it 100%. But this was not a problem because as the game prevents us from increasing our production space by more than 4000 per year, we were happy to have anticipated and to be able to produce a lot from year 13, as we needed. After year 12 this production capacity will be 100% useful to us, and we will continue to increase it as much as we can.

Also, we were the first to have a factory in Latin America and we were only 2 teams to have a factory in Europe-Africa, which gave us a good advantage.

DIAPO 4

The next major investment was the Corporate Social Responsibility and Citizenship initiatives. We had read in the rules of the game that in order to increase the image rating, the S/Q rating as well as CSRC initiatives were taken into account. As our strategy implied a low Style/Quality, we had to directly invest a lot in this tab to ensure a good image for our brand. Some of these options have a high upfront cost, but that fades away as the game progresses afterwards. As you can see for the rest of the game it paid off.

Then we invested in the first few years in improvements to our plants that we thought would pay off in the long run. We will reap the rewards of these investments in production costs and lower rejection rates later in the game.

DIAPO 5

We have also invested in training best practices, the benefits of which accumulate over the rounds. We had read that the benefits in terms of production costs would be significant in the longer term.

Then, we also put a $501 bid on each celebrity in case no team would bid or in case a team would bid only $500, the minimum allowable value. Our strategy worked and we got the first round 2 celebrities at very low prices.

DIAPO 6

So, after year 11 and 12, we already had good results, following the strategy described at the beginning. As you can see in the table, we have a good profit already. In the different region we had the best market share or the second best. We had around 20% market share everywhere in average already.  But we were only ranked 3 in the leaderboard for the following reasons :

we have made a lot of investment that did not pay off yet. As you can see in the income statement, we are paying way more Interest expenses than our competitors.

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