BOSTON LONDON PARIS
The Markstrat Challenge I
STRATX Licensing Division
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BOSTON LONDON PARIS
Markstrat is a simulation designed to focus on strategic marketing issues

Understanding customer needs

Long-term perspective

Marketing as profit center

Competitive environment

Marketing strategy is based on segmentation, positioning, and resource
allocation...
marketing mix decisions are secondary
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BOSTON LONDON PARIS
The Markstrat
World
Managing
your firm
Getting started
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BOSTON LONDON PARIS
The "Markstrat World:” a large territory with a highly developed economy
The Markstrat World:

Population: 250 million

Currency: Markstrat Dollar ($)
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The basic scenario begins with firms starting in different positions
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Each firm can compete in TWO product markets
SONITES

independent

not substitutes

not complements
VODITES

Maximum: 5 brands/firm marketed at a time
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The Sonite market is already developed, each product having 6
determining product characteristics
Weight
Kg
10 - 20
Volume
Design
Index
dm3
3 - 10
Max. Frequency
Base Cost
Power
W
kHz
5 - 50
20 - 100
5 - 100
$
min. 10
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Vodites will likely also have 6 main physical characteristics, but the
market is as yet untapped
Autonomy
m
5 -100
Design
Index
3 -10
Max. Frequency
kHz
5 -20
Weight
Kg
10 -100
Diameter
mm
10 -100
Base Cost
$
min. 10
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BOSTON LONDON PARIS
It is easy to recognize the origin of the brands from their names
S
I
Product
Type:
Company
marketing
the brand:
S=Sonite
V=Vodite
B
I
Freely chosen
letters or numbers
A, E, I, ...
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Sonite customers have traditionally been classified into 5 segments...
Singles
Professionals
Si
Pr
Buffs
High Earners
Hi
Others
Bu
Ot
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...whereas initial studies for Vodites have pointed to a different
segmentation scheme
Typical segment size evolution over time
sales
Followers
Early adopters
Innovators
time
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Sonite & Vodite customers have the choice of purchasing through 3
distinct distribution channels
Specialty
Stores
Department
Stores
Mass
Merchandisers
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Summary of Markstrat World environment:
Market growth
Technology
Economic environment
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The Markstrat
World
Managing
your firm
Getting started
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Your objective in managing your company is to maximize your
Share Price Index


To do that, 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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You will need to do a certain amount of analysis, before setting a strategic
direction for your firm
Data
Strategic
Options
Information
N
A
P0
P1
P2
P3
B
457
542
650
745
C
856
596
587
900
745
789
824
1203
W
E
S
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Market research studies provide market data ... it is up to you to prioritize,
digest and interpret them

Consumer survey

Consumer panel

Distribution panel

Semantic scales

Multi-dimensional scaling (MDS)
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Market research studies provide market data ... it is up to you to prioritize,
digest and interpret them (cont'd)

Industry benchmarking

Market forecast

Competitive advertising

Competitive sales force
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Market research studies provide market data ... it is up to you to prioritize,
digest and interpret them (cont'd)

Advertising experiment

Sales force experiment

Conjoint Analysis
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Once your strategy is clear, you should proceed to make a number of
tactical decisions each year

Production Planning

Inventory disposal

Pricing

Mass communication

Sales force & Distribution

Market Research
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Your production department will automatically adjust production levels
up to 20% (+ or -) against your plan.
Market
Demand
Inventory
build-up
Lost
sales
(assuming zero
inventory level)
Number of
Units
Production
QP
(1-20%)
QP
QP
(1+20%)
Requested
production
level
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Comparison of purchase intent with market share can give you a feel for
the size of "lost sales."
Purchase
Intent
-
Market
Share

Lost
Sales
competitors
“order-book”
?
lost to industry
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Pricing in Markstrat is fixed once a year
Recommended Retail Price = $100
Specialty
Stores
Department
Stores
Mass
Merchandisers
Average
Retail Price
$ 100
$ 100
$ 90
Distrib.
Margin
$ 40
$ 30
$ 27
Average
Selling
Price
$ 60
$ 70
$ 63
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Each firm receives a marketing budget for the coming period, based on
the previous period’s performance
Advertising expenditures
Budget
Advertising
Advertising Research
expenditures
for each
brand
Operating cost
Sales force
Hiring & training cost
Firing cost
R&D
Development budget
Market
Research
Sonite and Vodite
study costs
for each
project
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Brand results
CONTRIBUTION BY BRAND
Sonite Brands
Base R&D project
Sales
Units sold
Average retail price
Average selling price
Revenues
Production
Units produced
Current unit transfer cost
Average unit transfer cost
Cost of goods sold
Units in inventory
Inventory holding cost
Inventory disposal loss
Contribution before marketing
Marketing
Advertising expenditures
Advertising research expenditures
Sales force
Contribution after marketing
Unit
Total
SEMI
PSMO3
SELF
PSL01
SEXY
PSSI2
SEBU
PSBU2
SEOT
PSOT2
U
$
$
K$
742 649
358
233
172 969
260 829
399
264
68 858
162 484
442
282
45 820
211 336
279
181
38 251
60 000
357
222
13 320
48 000
204
140
6 720
U
$
$
K$
U
K$
K$
K$
860 000
117
-86 800
232 955
-1 977
-1 498
82 693
320 000
114
114
-29 734
59 171
-539
0
38 584
112 000
116
120
-19 426
65 120
-604
0
25 790
320 000
96
96
-20 288
108 664
-834
0
17 129
60 000
202
202
-12 120
0
0
0
1 200
48 000
109
109
-5 232
0
0
-1 498
-10
K$
K$
K$
K$
-9 506
-392
-2 097
70 692
-3 007
-93
-385
35 098
-1 995
-105
-488
23 202
-3 007
-93
-386
13 642
-500
-49
-433
216
-997
-52
-405
-1 466
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BOSTON LONDON PARIS
Company Performance
Sales
Units sold
Average retail price
Average selling price
Revenues
Production
Units produced
Cost of goods sold
Inventory holding cost
Inventory disposal loss
Contribution before marketing
Marketing
Advertising expenditures
Advertising research expenditures
Sales force
Contribution after marketing
Other expenses
Market research studies
Research and development
Interest paid
Exceptional cost or profit
Net contribution
Next period budget
Unit
Total
Sonite market
Vodite market
U
$
$
K$
779 797
364
237
185 007
742 649
358
233
172 971
37 148
473
324
12 035
U
K$
K$
K$
K$
897 148
-97 239
-1 978
-1 498
84 290
860 000
-86 800
-1 978
-1 498
82 693
37 148
-10 438
0
0
1 597
K$
K$
K$
K$
-12 517
-883
-2 313
68 577
-9 507
-393
-2 099
70 693
-3 010
-490
-214
-2 116
K$
K$
K$
K$
K$
K$
-1 381
-2 900
0
0
64 295
24 350
-657
-900
-584
-2 000
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BOSTON LONDON PARIS
The simulation starts at the end of the initial period, the new management
(you!) making decisions for the next period
MS3
Pn+1
...
START
MS3
Pn MSPH
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BOSTON LONDON PARIS
The decisions for the first period are limited in scope, so that your team
can familiarize itself 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
Information
overload
Time
pressure
Conflicting
opinions
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BOSTON LONDON PARIS
The Markstrat
World
Managing
your firm
Getting started
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BOSTON LONDON PARIS
When you return to your team room, the Main Menu will be on your PC
screen
Module Bar
Click here to
switch to the
decision mode
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After accessing the Decision Module Main Window, you will start making
decisions for the coming period
Click here to
access the
Production, Price
and Advertising
module
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BOSTON LONDON PARIS
Decisions on production, price and advertising should be entered for
each brand
Switch from
Sonites to
Vodites
You are making
decisions for
brand SEMI
Switch from
one brand
to another
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The sales force is organized by channel type to better meet the specific
needs of the channels
click here to normalize sales force
effort to 100% in each channel
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Buying market research studies will help you make sound decisions
Your selections
update the cost
of selection
automatically
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BOSTON LONDON PARIS
You can monitor the status of your decisions at any time
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Don't forget to transfer your decisions ...
Step 1
Click here to access
the Interface Module
Step 2
Transfer your decisions
and hand your data disk
over to the
Administrator
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BOSTON LONDON PARIS
On your marks, get set, GO!

Give a name to your company

Respect the deadlines
Good luck!
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