Markops
Student Handbook by Rémi J. Triolet, PhD
Partner, Chief Science Officer
STRATX
……………………………………………………………………………………….. i Publisher: STRATX
Publisher: STRATX
Logo Design: Synergy Network, Waltham, Massachusetts
Website Design: Business Lab, Paris France
Marketing Team - Americas: Lucy Jacobus, Paul Ritmo
Marketing Team – Europe, Middle-East, Asia, Africa: Sabine Fabbricatore, Laura Manceron
Development Team: Rémi Triolet, Didier Drobecq, Aurélien Dauvergne, Christophe Pottier
Copyright ©2005 by STRATX
Software © 2005 by STRATX
ALL RIGHTS RESERVED
No part of this book may be reproduced in any form, electronic or mechanical, without the prior permission of the publisher.
ISBN# 0-9743063-2-0
Version 1.0
……………………………………………………………………………………….. ii Contents
Introduction…………………………………………………………………………………………………………v
About STRATX………………………………………………………………………………………………………vi
About the Author…………………………………………………………………………………………………vii
Questions and Technical Support……………………………………………………………………………viii
1
REGISTRATION AND SOFTWARE SETUP................................................... 1
1.1
1.2
1.3
1.4
2
MAKING DECISIONS WITH MARKOPS ONLINE.......................................... 5
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
3
Formula Discovery ....................................................................................................... 16
Formula Development and Brand Portfolio ................................................................... 17
Brand Management ...................................................................................................... 19
Channel Management .................................................................................................. 21
Ordering Market Studies .............................................................................................. 21
Budget......................................................................................................................... 22
Setting your Team Name.............................................................................................. 22
Decision Highlights...................................................................................................... 23
Past Decisions.............................................................................................................. 23
YOUR ANNUAL REPORT ............................................................................ 24
5.1
5.2
5.3
6
Introduction................................................................................................................. 11
Your Role..................................................................................................................... 11
Overview of the Markops Online Industry..................................................................... 11
Product Profiles ........................................................................................................... 12
Naming Conventions ................................................................................................... 13
Consumers .................................................................................................................. 13
Distribution Channels .................................................................................................. 14
Margins and Discounts ................................................................................................ 14
MANAGING YOUR FIRM.............................................................................. 16
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
5
Overview........................................................................................................................ 5
Authenticating ............................................................................................................... 5
Self-assigning to your team........................................................................................... 6
Downloading your Team File from the Markops Online server........................................ 7
Organizing a Markops Online working session............................................................... 7
Saving your team file on the Markops Online server....................................................... 8
Working in an environment with limited access to Internet ............................................ 9
Submitting your Decisions for Run................................................................................. 9
Checking your Course and Team status on the Markops Online server......................... 10
Starting your next Decision Round and Accessing your Team Rankings ................... 10
OVERVIEW OF THE MARKOPS ONLINE WORLD ..................................... 11
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
4
The Registration Process................................................................................................ 1
Downloading and Installing the Team Software.............................................................. 2
Practicing using the SAMPLE File .................................................................................... 3
Using the Tools menu to test your installation ............................................................... 3
Newsletter ................................................................................................................... 24
Company Report .......................................................................................................... 25
Market Studies............................................................................................................. 27
FINAL RECOMMENDATIONS ...................................................................... 31
…………………………………………………………………................... iii Table of Illustrations
All figures in this manual are from a sample file obtained during a past run of the Markops Online simulation. They are included to provide examples of charts, tables, graphs or input screens. Please note, the market situation used for these examples is different from the one which you will face.
Figure 1 – Sample Markops Online ID card _________________________________________ 1
Figure 2 – Installing Markops Online Team Software_________________________________ 2
Figure 3– Modifying your Proxy Settings __________________________________________ 4
Figure 4 – Authenticating _______________________________________________________ 6
Figure 5 – Self-assigning to your team ____________________________________________ 6
Figure 6 – Opening your team file ________________________________________________ 7
Figure 7 – Saving your team file on the Markops Online server ________________________ 8
Figure 8 – Submitting your decisions for run _______________________________________ 9
Figure 9 – Checking Course and Team status on the Markops Online server____________ 10
Figure 10 – Physical attributes of marketed brands_________________________________ 12
Figure 11 – Reduction of production cost as a function of cumulative production _______ 13
Figure 12 – Summary of distribution channels’ margins and discounts ________________ 15
Figure 13 – R&D Report : Discovered Formulas ____________________________________ 17
Figure 14 – R&D Report: Developed formulas _____________________________________ 17
Figure 15 – Brand portfolio decision screen _______________________________________ 18
Figure 16 – Brand launch or upgrade decision screen ______________________________ 18
Figure 17 – Brand management decision screen ___________________________________ 20
Figure 18 – Channel management decision screen _________________________________ 21
Figure 19 – Ordering market research studies _____________________________________ 22
Figure 20 – Comparing expenses with available budget _____________________________ 22
Figure 21 – Setting your team name _____________________________________________ 23
Figure 22 – Newsletter : Company Key Performance Indicators_______________________ 24
Figure 23 – Company Report : Firm Results _______________________________________ 26
Figure 24 – Company Report : Messages from the simulation ________________________ 26
Figure 25 – Consumer panel : Market shares ______________________________________ 27
Figure 26 – Consumer Survey : Shopping habits ___________________________________ 27
Figure 27 – Distribution Panel : Distribution coverage ______________________________ 28
Figure 28 – Semantic Scales : Brand Perceptions __________________________________ 28
Figure 29 – Semantic Scales : Brand Map _________________________________________ 29
Figure 30 – Competitive Intelligence : Advertising budgets __________________________ 29
Figure 31 – Market Forecast : Channel sizes and growth rates _______________________ 30
Figure 32 – Market Forecast : Expected new brand launches by competitors ___________ 30
…………………………………………………………………................... iv Introduction
Markops Online is the latest STRATX simulation.
As with every StratX simulation, Markops Online places real market forces at the heart of the learning experience. Markops Online focuses on operational marketing, while keeping the key principles of strategy at the heart of decisions. It's all about giving participants a platform from which to apply their ideas, and the security to build skills with confidence.
Used in combination with traditional training methods such as conceptual sessions or case studies,
Markops Online is a highly effective tool to learn operational marketing concepts, such as brand management, channel management, communication and promotion or pricing strategy.
It also covers key strategic marketing concepts such as brand portfolio strategy or segmentation and positioning strategy.
Similar to a flight simulator, this marketing simulation allows students and managers to practice new skills in an intensive time frame and in a risk-free environment before trying them out in a real business environment.
The mathematical model of Markops Online is based on solid theoretical foundations, and the underlying formulas have been extensively tested. This simulation has been used to successfully train a large number of students and executives from many universities and organizations.
Several months of development have been necessary to develop the Markops Online simulation, which benefits from StratX’ extensive experience in the field of business simulations. In particular, StratX is the author of the Markstrat Online simulation, which was originally developed more than twenty years ago by Jean-Claude Larréché, Alfred H. Heineken Professor of Marketing at INSEAD, and Hubert
Gatignon, The Claude Janssen Chaired Professor of Business Administration and Professor of Marketing at INSEAD.
During the Markops Online exercise, you and your team will be given a company and product portfolio to manage in a dynamic and interactive environment. No previous computer experience is required but it is important to prepare by reading this handbook prior to beginning your course. If you do not read it carefully, you will run the risk of putting your team at a competitive disadvantage!
…………………………………………………………………................... v About STRATX
StratX is a unique consulting and management development group that brings together disciplines from leading business schools, management consultants and learning design specialists. Founded by
INSEAD Marketing Professor, Jean-Claude Larréché, our aim is to help leading international corporations achieve their business objectives along three dimensions: strategic change facilitation; marketing skills and capabilities development; and marketing excellence and customer centricity.
Moreover, our approach mobilizes a group of individuals behind a common goal with a common language to achieve results. StratX offers training solutions that include advanced business simulations, interactive concept discussions, team project work and a host of other traditional and online learning opportunities.
Over the past twenty years, our R&D team has designed and developed a portfolio of world-class business simulations, including Markstrat 3 and Markstrat Online, used in over 500 business schools and universities throughout the world. StratX has also developed the L’Oréal e-Strat simulation, used each year since 2001 during the L’Oréal e-Strat Challenge, an on-line interactive, simulation-based competition during which thousands of teams run a Cosmetics company and compete for a chance to sell their virtual company to a board of L’Oréal executives.
Our world-wide network of StratX consultants work with clients such as L’Oréal, General Electric, Pfizer,
Siemens, ABN AMRO, Novartis and Boeing.
…………………………………………………………………................... vi About the Author
Rémi Triolet holds a master's degree in computer science from ENSIMA, an engineering school in
Grenoble (France), and a PhD in mathematics from Paris-VI University and Ecole Supérieure des Mines de Paris.
Just after his graduation, Rémi worked in a research team at Ecole Supérieure des Mines de Paris and then at Morpho-Systems, a medium-size French company leader in the automated recognition of fingerprints. His main interest at that time was the design of efficient numerical algorithms for supercomputers. Rémi joined StratX in 1991 to work in close cooperation with Professor Jean-Claude Larréché on the design and development of new leading strategic simulations such as "MARKSTRAT-PHARMA",
"MARKSTRAT-SERVICES", "MARKPRO Business-to-Business", "GAMAR3", etc.
Important milestones in Rémi's carreer at StratX were the design of "MARKSTRAT3" and "MARKSTRATONLINE", two versions of our star simulation, licensed in over 500 business school around the world, and of "E-STRAT", a web-enabled simulation developed for L'Oréal and used to run a global competition with over 30,000 business school and university students.
…………………………………………………………………................... vii Questions & Technical Support
This manual has been designed to be as clear and complete as possible. However, the Markops Online simulation is fairly complex and we know by experience that some topics will require additional explanation. If you have questions regarding this handbook or the simulation we suggest that you follow the steps below.
Check the Frequently Asked Questions (FAQs) available for download on the www.markopsonline.com web site. Other students may have already asked a similar question, checking the FAQs will help you save time. If you do not find the response to your question in the FAQs, please contact your instructor.
As most instructors prefer to keep the full content of their course, StratX’ policy is to not respond directly to student’s questions.
Responses to frequently asked questions do not address specific team situations and do not provide advice or hints on strategy, management, marketing, finances or any other topic. For these subjects, you should only count on your knowledge, ideas and experiences (or those of your team…)
Here are some examples of questions already addressed in the FAQs:
• What is the formula for the Stock Price Index?
• How can I know the fixed production cost for each brand?
• Is Markops Online compatible with Windows XP?
…………………………………………………………………................... viii 1 REGISTRATION AND SOFTWARE SETUP
You will have to go through a few easy administrative steps before you are able to make your first set of decisions with Markops Online. Please read carefully the following pages as it is important that you perform these steps in the appropriate order and at the right time.
The tasks to perform are listed below and are explained in more detail in the following pages.
• Purchasing your own copy of this handbook and registering on our web site;
• Downloading and installing the Markops Online team software;
• Testing your installation and discovering the Markops Online environment with the SAMPLE file.
1.1 The Registration Process
1.1.1 Why register
The usage of Markops Online is strictly reserved to registered students. The registration process will allow you to be uniquely identified in the Markops Online remote database. The username and password that you have chosen at registration will authenticate you when using the Markops Online software.
Registration is absolutely mandatory. As explained in chapter 2 you and your team will have to exchange data back and forth with the Markops Online server during your course. For obvious security reasons, you will have to be fully authenticated before you are allowed to transfer data to or from the server.
1.1.2 How to register
Step 1: Buy your own copy of this handbook, which comes with a license number allowing you to access the
Markops Online web site and team software. If the handbook is provided to you by your teaching institution, your Markops Online instructor will provide you with a license number and course ID at the beginning of your course. You will find on the last page of this book a blank Markops Online ID Card (see Figure 1).
ONLINE
FILL IN YOUR PERSONAL MARKOPS ONLINE ID CARD AND KEEP IN A SAFE PLACE.
Figure 1 – Sample Markops Online ID card
The license number given to you by your instructor is unique. It is required to register on the Markops Online web site. You can write it down on the front of this card.
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1
Step 2: Go to www.markopsonline.com, select the Registration section and follow the instructions carefully.
You will be asked to choose a username & password and to enter your course ID and your license number. If you do not yet know your course ID, leave the cell blank and continue; you will be allowed to enter it later.
The additional fields: Team ID and Team Password are explained in Chapter 2.
1.2 Downloading and Installing the Team Software
1.2.1 How to download the setup file
To download the software, visit our web site at http://www.markopsonline.com, type in your username and password in the Student Login section and select Downloads. You will find a series of hyperlinks to download the manual, the software setup file and to browse Frequently Asked Questions.
Click one of these links to initiate the download. Your browser may ask you whether you want to execute the file transfer directly from the site or save it to disk. Select the save to disk option and save the file on your local hard drive.
1.2.2 Computer Requirements
The minimum computer configuration required to operate the Markops Online software is the following:
• Pentium-based processor with 16 megabytes of memory;
• Hard disk with at least 20 megabytes of available storage;
• Windows 9X, Millenium, 2000, NT4, XP, 2003, or above.
• Internet connection (only during authentication and file transfers);
1.2.3 Installing the Software
You should now have on your hard drive a self-installable setup file named Markops Online Team Setup VX-XX-X.exe. Double-click on this file to start the setup procedure.
A window entitled Welcome to the InstallShield Wizard for Markops OnlineTeam pops up, as shown in Figure
2. Click on the Next button to continue the setup procedure.
A window pops up allowing you specify in which folder Markops Online should be installed. The default folder
C:\Program Files\STRATX\Markops Online, is indicated in this window. We strongly advise using this default folder as it will make your life easier and reduce the risk of errors. For instance, reading the FAQs will be simplified as we will always refer to the default installation folder. If you need to install Markops Online in another folder, click on the Browse… button.
The actual installation starts when you click on the Next > button. All files are copied into the folder which you specified. Two of these files are registered automatically in the Windows registry.
The setup utility creates a shortcut called Markops Online Team on your desktop. Double-click on this shortcut to launch the application.
Figure 2 – Installing Markops Online Team Software
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1.3 Practicing using the SAMPLE File
If you want to test your installation and practice prior to the beginning of your first Markops Online decision round, you may do so with the SAMPLE file. This SAMPLE file is installed by default in your “My Markops Online
Files” folder when you install the Markops Online software. The password for this file is SAMPLE. This data file contains results for all rounds up to Round 3 and default decisions for Round 4, from a previous run of the
Markops Online simulation. It will allow you to practice using Markops Online, i.e. to browse through the results charts and graphs; to print a sample Annual Report; to enter each of the decisions screens; and to test your HTTP connection by using the Tools menu.
The SAMPLE file is a practice data file. The market situation which you will be faced with during your actual
Markops Online course will be substantially different. Similarly, the decisions you will find in this file are not the examples of the best ones that a successful team can come up with. Thus, our advice is:
DO NOT SPEND TOO MUCH TIME ANALYZING THE MARKET SITUATION OF THE
SAMPLE FILE. ANY DECISIONS MADE USING THE SAMPLE FILE WILL NOT BE
RUN THROUGH THE SIMULATION MODEL AND WILL BE IGNORED ONCE YOUR
COURSE STARTS. MOREOVER, THE INITIAL MARKET SITUATION WHICH YOU
WILL HAVE TO ANALYSE ONCE YOUR COURSE STARTS WILL BE DIFFERENT.
1.4 Using the Tools menu to test your installation
1.4.1 Testing your connection
Clicking on Tools/Test your connection will initiate the authentication process on the Markops Online server and test if your Internet connection works properly and if you can connect to the Markops Online database.
1.4.2 Checking your installation folders
Clicking on Tools/Installation Folder will launch a dialog box letting you know:
- In which folder your team file is located (by default, it is in the “C:\My Documents\My Markops Online Files” folder) - In which folder the Markops Online application is located (by default, it is in the “C\Program
Files\STRATX\Markops Online” folder)
1.4.3 Checking your Team and Course status on the Markops Online server At any time, you can use the Tools/Check Status on Web server function of the Markops Online to provide you with your latest Course and Team status, as shown in Figure 9.
This feature is particularly useful to:
- check how you are progressing with your decision rounds;
- check the date and time of your latest successful file transfer;
- retrieve your team password in case you can’t remember it;
- etc.
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3
1.4.4 Modifying your Proxy Settings
If you connect to the Internet via a Proxy server, you can use the function Tools/Proxy Settings to modify your
Proxy settings.
By default, this form is pre-filled in with the settings used by Internet Explorer. Please contact your IT department should you need to modify your Proxy settings.
Figure 3– Modifying your Proxy Settings
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2 MAKING DECISIONS WITH MARKOPS ONLINE
2.1 Overview
You and your team will have to make up to six rounds of decisions during a Markops Online course. For your decisions to be processed by the simulation model, data need to be exchanged over the Internet through a database server called the Markops Online server.
The data to be exchanged are your decisions and the simulation results. All data is located in a file called Team
File, named TEAMXX.XST, where XX stands for the team number which will be communicated to you by your
Markops Online instructor at the beginning of your course. There is only one file per team as all members of the same team share the same results and the same decisions. However, you will see that the team file can be duplicated on several computers if two or more team-members want to work in parallel.
For the first round of decisions, your team file contains information on the initial situation, i.e. market data, consumer segments, brands, channels, firms, as well as a copy of the decisions that were made by the previous management team. For subsequent rounds, the file contains the latest simulation data, obtained after the simulation run, and a set of decisions –called default decisions– that are just a copy of your decisions from the previous period. The objective of these default decisions is to prevent you from starting each time from scratch when making decisions, with zeros in all input screens. If you use these default decisions during the Markops
Online exercise, your results may suffer dramatically as they are far from being optimal.
Your Markops Online instructor is responsible opening each decision round, which will give you access to the latest simulation results.
Once your Instructor has opened a decision round, you and your team are in charge of your team file. You can read and print out your latest annual report and begin the process of analyzing the current situation. This analysis will lead to a series of decisions, which will be input into the decision screens provided. Once your decisions are finalised and error-free, you are in charge of saving your team file to the Markops Online server and requesting a run of the simulation. The simulation model will run, and produce a new set of results. You will be able to access your updated team file as soon as your Instructor opens the next decision round.
2.2 Authenticating
This step is required each time you connect to the Markops Online server, for example to download or to upload your team file. For security reasons, access to the Markops Online server is reserved to registered students. If you are not yet registered, please refer to section 1.1 of this manual.
The window shown in Figure 4 pops up each time you connect to the Markops Online server. Enter the username and password that you chose upon registration and select Next. The software connects to the Markops Online server and checks your identification. Please, note that you must be connected to the Internet to authenticate. The
Markops Online software does not initiate an Internet connection.
If you do not remember your username and password, click on Lookup in the pop-up window shown on Figure
4and you will be redirected to the Student Login section on the Markops Online web site; using your Markops
Online license number you will be able to retrieve your personal data.
Copyright © 2005 by StratX
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Figure 4 – Authenticating
If you are working on your own computer, you can tick the option Remember the password. Your password will be stored locally and will automatically reappear each time you authenticate. Please Note; this option should not be computers. used on shared computers
2.3 Self-assigning to your team
After authentication, the Team Selection window in Figure 5 pops up. Select your team and enter your team password. Your initial team name is TEAMXX, where XX stands for the team number which has been communicated to your team and you by your instructor at the beginning of the course, together with your team password.
Once you have entered this information, click on OK on the left hand side of the pop up window in Figure 5. selfYou only have to self-assign to your team the first time you download your team file.
Figure 5 – Self-assigning to your team
Copyright © 2005 by StratX
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The Markops Online software connects to the server, checks your identification (team name and password) and checks if your team is complete.
A complete team is a team for which:
• at least three members have successfully registered to the www.markopsonline.com web site
• at least three members have self-assigned to their team, using the Markops Online software. your complete,
If your team is complete you will be able to download your team file from the Markops Online server to your local disk drive and your team file will open automatically upon completion of the download. complete, If your team is not complete you will receive a message from the software. In that case, just wait until the other members of your team register on the www.markopsonline.com web site and self-assign to your team using the
Markops Online software. Once this is done, you will be able to download your team file.
Please note: Even if your team is complete, your Markops Online instructor must have started the Markops Online course before you can download your team file from the Markops Online server.
2.4 Downloading your Team File from the Markops Online server
At the beginning of each decision round, you must download your team file from the Markops Online server to access the latest simulation results. To download your team file, click on Open/From web server… in the File menu.
The download is completed upon authentication, and the team file opens automatically.
2.5 Organizing a Markops Online working session
Once you have downloaded your team file from the Markops Online server, you are able to read and print out your latest annual report and begin the process of analyzing the current situation. This analysis will lead to a series of decisions, which will be input into the decision screens provided. Details on the annual report and decision screens are provided in Chapters 4 and 5 of this manual.
If you have started a working session, and need to close it to resume it later, just click on Close in the File menu.
Your decisions will be saved automatically on your computer’s hard drive.
To open your team file from your local computer at a later stage, you must use the File/Open/Local Copy function and then select your team name and enter your team password in the screen shown in Figure 6.
Figure 6 – Opening your team file
As explained further in section 4.7, your team and you will be required to set a new name for your team during your first round of decisions,.You will then have to use this new name to open your team file during subsequent decision rounds. Your password, however, will remain the same throughout the Markops Online exercise. If you
Copyright © 2005 by StratX
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forget your team password, you can retrieve it by using the Tools/Check Status on web server function of the
Markops Online Team software, as explained in section 2.9.
2.6 Saving your team file on the Markops Online server
Within each Decision Round, you and your team may choose to organize several working sessions with the
Markops Online software. You can make a detailed analysis of your results on day 1, make R&D and brand portfolio decisions on day 2, make marketing mix decisions on day 3 and finalize everything on day 4. You may make decisions all together or choose to work remotely from different computers. The Markops Online software includes several features to help you with these different situations.
If you and your team decide to assign responsibilities (R&D, Production, Finances,…) to team members and to work remotely from different computers connected to the Internet, we strongly advise that you use the Markops Online server as a central location to save your team file.
To do this, use the File/Save function of the Markops Online software after you have taken your decisions. You will be required to authenticate, as explained in section 2.2, then the window shown in Figure 7 will pop up. Click on
"Upload" to store a copy of your team file on the remote server. You will receive a confirmation message upon completion. Then, the other members of your team will be able to download your team file from the Markops
Online server, using the procedure described in section 2.4, and input their own decisions into this file, which will contain the first set of decisions which you have already taken.
Figure 7 – Saving your team file on the Markops Online server
Please note that if you choose to work in this way, you should work in a sequential manner and not in parallel, otherwise you risk losing decisions which have already been taken. For example, we recommend the process described in Table 1.
WHO
Team Member 1
Team Member 2
Team Member 3
Copyright © 2005 by StratX
WHEN
WHAT
Open team file from Markops Online server
Day 1
Work and input decisions
3. Save updated team file to Markops Online server
4. Open latest team file from Markops Online server
Day 2
5. Work and input decisions
6. Save updated team file to Markops Online server
7. Open latest team file from Markops Online server
Day 3
8. Work and input decisions
9. Save updated team file to Markops Online server
Table 1- Making decisions in a sequential manner
1.
2.
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If Team Members 2 and 3 do not coordinate and decide to download the file from the Markops Online server on
Day 2 and work on this file in parallel, then the file which will be saved on the server at the end of Day 2 will only contain the decisions taken by Team Member 1 and the ones taken by Team Member 2 OR Team Member 3, depending on which one has saved its file last. In any case, this file will NOT CONTAIN ALL OF YOUR
DECISIONS.
Therefore, make sure that you coordinate your teamwork to avoid losing decisions and wasting a precious time.
Even if you and your team decide to always work together, the Save Team File to Markops Online server function allows you to always keep a back-up of your team file.
2.7 Working in an environment with limited access to Internet
If you are working from a computer without a permanent Internet connection, you can save your team file locally on your computer when you close a Markops Online session and re-open it later to continue your work on Markops
Online. To do so, select Close in the File menu to finish the session and click on OK to save your file.
If you want to work from another computer afterwards, you can save your team file on a diskette, USB drive, zip drive or any other removable storage, and load it on another computer. Your team file is a file named TEAMXX.XST, where XX stands for your initial team number, which is by default located in the “C:\My Documents\My Markops
Online Files” folder of your computer.
Go to this folder using Windows Explorer, copy the TEAMXX.XST file on a removable storage, and then paste this file in the “My Markops Online Files” folder of the other computer which you would like to use. Obviously, you should have installed the Markops Online software on the other computer before performing this operation.
You can then open your team file from the other computer, using the File/Open/Local Copy function of Markops
Online.
2.8 Submitting your Decisions for Run
Your team decisions will be due on specific dates, as per the schedule specified by your Instructor. free. You can only submit your decisions for run when they are error free For instance, the software will not let you proceed if you exceed your budget. Make sure to check the screen Decision highlights at regular intervals as you do not want to find yourself with 15 or 20 errors 10 minutes before the closing deadline …
To submit your final and error-free decisions for run, you must first save your decisions to the Markops Online server, as explained in section 2.6, then select Submit for Run… in the File menu. You need to authenticate to perform this operation. Upon authentication, the dialog box of Figure 8 pops up.
Please make sure that the decisions you are about to submit for run are the latest ones before you click on submit “Yes.” Once you have submitted your decisions for run, you will not be able to make any further modifications not to your decisions until the beginning of the next decision round.
If the Submit for Run function in the File menu is grayed out, it means that your decisions are either not complete or not error-free. You will not be able to submit your decisions for run until you correct your errors.
Figure 8 – Submitting your decisions for run
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2.9 Checking your Course and Team status on the Markops
Online server
At any time, you can use the Tools/Check Status on Web server function of the Markops Online to provide you with your latest Course and Team status, as shown in Figure 9.
This feature is particularly useful to:
- check how you are progressing with your decision rounds;
- check the date and time of your latest successful file transfer;
- retrieve your team password in case you can’t remember it;
- etc.
Figure 9 – Checking Course and Team status on the Markops Online server
2.10 Starting your next Decision Round and Accessing your Team
Rankings
As soon as your instructor opens a new decision round, you will be able to download your updated team file by following the instructions detailed in section 2.4.
You will also be able to compare your results to those of the other teams in your Markops Online course, by using the Rankings menu. Please note that access to this menu is controlled by your instructor. You will only be able to access your course rankings if your professor decides to grant you access.
Copyright © 2005 by StratX
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ARKOPS
3 OVERVIEW OF THE MARKOPS ONLINE WORLD
3.1 Introduction
The Markops Online business game simulates a fictitious world where four companies are in competition to market a portfolio of brands to several groups of customers. The simulated market is complex enough to illustrate different marketing situations, i.e. various segments of customers (based on family income, marital status, occupation, …), several customer value combinations (high-end brands versus low-end ones), varying price sensitivities, different communication and promotional tools, traditional distribution channels (from mass merchandisers to specialty chain stores) as well as new e-enabled channels (such as e-grocers and eboutiques), etc.
You and your team will manage Chewy, one of these companies, during six periods of six months, i.e. three years in total. The simulation model will run the decisions and results of the other companies automatically, challenging you with innovative decisions, but also responding to your moves.
The other human teams involved your Markops Online course will manage the same company Chewy, but in other simulated worlds, totally separate from your own world. Consequently, the decisions of the other teams will have no impact on your own results. Your ultimate objective is to maximize shareholder value as reflected by the Share Price Index of Chewy. However, there are two ways to measure your results:
•
•
Absolute Measure. Your share price index at the end of the exercise will be compared to the ones of your direct cyber competitors. You may, for instance, have increased the market value of your company by 300% while your best competitor will only have achieved a result of 250%.
Relative Measure. Your final share price index will also be compared to the ones achieved by the other human teams, who have run the same exercise with the exact same starting situation and the exact same competitors. Your absolute performance of 300% may be reevaluated as fairly poor if another team achieved a result of 500%!
As far as this Markops Online exercise is concerned, only the relative measure will be taken into account. The ultimate winner will be the team which has achieved the highest Share Price Index for its own Chewy company.
3.2 Your Role
You and the other members of your team have just been recruited by Chewy, a large corporation, to manage one of its divisions. Coming from a different industry, you have no experience of the Markops Online world. In the upcoming years, you will compete with several other firms to market fast moving consumer goods (FMCG) products to consumers. During this exercise, you will be responsible for formulating and implementing the marketing strategy of your division for a simulated period of 3 years of business activity (i.e. six decision rounds). You and your team members will have to:
• target selected segments and position your products in the market place;
• develop new products from formulas discovered by your R&D department;
• prepare the launch of new products; improve or maintain existing ones;
• interface with the Production department to specify capacity and production planning;
• make marketing mix decisions, such as pricing and advertising budget;
• decide on how to distribute your brands and allocate resources across channels;
• order market studies that provide up-to-date information for decision making.
3.3 Overview of the Markops Online Industry
The Markops Online world is a fictitious industrialized country with approximately 80 million inhabitants whose monetary unit is the Markops Online Dollar ($). In this country inflation is practically zero and is therefore ignored. GNP growth is fairly stable, and no major political, social or economic events are
Copyright © 2005 by StratX
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anticipated in the near future. The Markops Online world does not intend to represent any particular country, market or industrial sector. However, it roughly behaves like most markets, and the general management and marketing knowledge that you have acquired through business experience or formal education applies to this new world.
In the Markops Online world, there are a handful of companies which manufacture and market FMCG products. Besides Chewy – your own firm – your competitors are called Whippit, Savor, and Tasty. Chewy,
Whippit, Savor and Tasty are four traditional brick-and-mortar firms that operate according to a traditional business model. They mainly distribute their products through established distribution channels, although a few of them have initiated a slow transition into the new Internet world.
These firms operate in a fast moving consumer goods environment. They market edible consumer products called Yumites. These products have existed for several years and the market has grown quite consistently since the introduction of the first Yumite brand. It is now a well-established market, with several strong brands at different price points covering a wide range of needs. Analysts believe that the Yumite market will continue to grow over the next five years.
Initially each firm starts with two or three products, with different product specifications, target customer groups, brand awareness levels, market share, distribution coverage, profitability, R&D expertise, etc.
Consequently, the marketing strategy of each firm should be adapted to its particular situation within the industry. Nevertheless, no firm has a relative advantage over the others and initially many characteristics are common to all firms. Each firm in the Markops Online world will have the opportunity to discover new formulas and introduce new products or upgrade existing ones. Similarly, all firms may access any distribution channel.
3.4
Product Profiles
At the beginning of the simulation, the rival firms market two or three brands each. These products are widely accepted by the various segments of consumers, and the market as a whole is expected to grow in the coming years. The Yumite products marketed by the various firms in this market are differentiated by tangible physical attributes, which are rated on a scale of 0 (poor) – 100 (excellent). The most important attributes are the following:
• Performance – Ability of the product to deliver the benefit intended. This measure can include such components as appearance, texture, sensation, etc.
• Nutrition – Degree to which the product is “good for you” or has high quality ingredients. A high rating is an indicator of no preservatives, little artificial color, no added sugar, etc.;
• Packaging – Characteristics of the product packaging. Several benefits are included here, such as attractiveness, ease of use, convenience, appropriate serving size, etc.;
• Flavor – Quality of the product taste, in terms of uniqueness and pleasure of the taste experience with the product, and of ability to support the performance claim. For instance, high quality flavors can express concepts such as smooth, natural, fresh, etc.
Figure 10 shows an example of ratings for existing products along these four dimensions. As with all the other figures in this manual, Figure 10 was obtained during a past run of the Markops Online simulation.
Please note, your own market situation may be very different.
Figure 10 – Physical attributes of marketed brands
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As new formulations come onto the market, improvements will take place in certain products’ attributes. Bear in mind that an improvement in one dimension may result in deterioration in another dimension. For instance, a higher performing product may be less nutritional as the new formula includes artificial coloring which enhances appearance.
Depending on the particular combination of attributes, each product will have a certain initial unit production cost, i.e. the cost charged by your production department to manufacture the product. As cumulative production experience increases, this cost will decline in accordance with a specific schedule corresponding to four production batches, each one of which has a cost 15% lower than the previous one:
Millions of Units Produced
(cumulative)
< 10
Production Cost Applied
C : Initial Production Cost
10 to 20
C x 0.85
20 to 40
C x 0.85 x 0.85
> 40
C x 0.85 x 0.85 x 0.85
Figure 11 – Reduction of production cost as a function of cumulative production
3.5
Naming Conventions
All brands marketed in a given period will be listed in the Newsletter, in a table similar to Figure 10. In the
Markops Online world, the first letter of a brand name is the same as that of the name of the firm. When introducing a new brand, you will have to choose a new name provided by the trademark department.
However, the selected name has no influence on the market response to the brand.
3.6 Consumers
The consumers who purchase Yumite products are of varying ages, occupations, and family status. They are all adults, over 18 years of age, who purchase the products for personal use or for the family. Market studies show that these consumers can be divided into five major groups, or segments, having similar needs and purchasing behavior.
1. High earners – The members of this group are characterized by their high incomes. They are men or women over 25 years of age, either single or married without children, and studies show that they usually buy expensive products, which they can afford, and that their purchases can be motivated by social status. They are heavy users and can sometimes be price insensitive to the point of disregarding cheap brands.
2. Affluent Families – People in this segment are aged 25 – 45, and are either married or single with children. Their high income level leads them to be frequent buyers and users of Yumites. They can afford expensive products and often view price as an indication of quality.
3. Medium Income Families – These consumers have less disposable income than the Affluent Families, and are thus more price sensitive. This segment also includes some sub-groups who do not fit with the other segments. Although this segment is the largest in value and is composed of several subgroups, most customers have similar needs. They are looking for relatively inexpensive products with average physical attributes.
4. Low Income Families – Individuals in this segment are aged 25 – 45, and are either married or single with children. Their low income levels, however, causes their budgets to be strained, and leads them to be less frequent buyers and users of Yumites, and to be very price sensitive.
5. Singles – As the name of this segment indicates, Singles live alone. They are generally between 18 and 35 years of age and can be students or employed. All in all, while being relatively heavy users, they demand average levels of physical attributes from their Yumite products and tend to be pricesensitive.
Each segment has specific needs in terms of physical attributes and price. The semantic scales market studies reflect the relative importance of the different physical attributes and of price for each consumer segment, as well as consumer perceptions of each of the marketed brands as regards their physical attributes and price.
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Awareness levels and purchase intentions vary significantly for existing products from one group to the other.
In addition, market forecast studies show that the size and growth rates of the five segments are quite different. This is explained in part by the development stage of each segment, by the varying product offerings, and by the intensity of marketing efforts targeted at each segment.
3.7 Distribution Channels
3.7.1 Traditional Distribution Channels – Retailers
Yumite consumers tend to shop in the following three distribution channels.
• Mass Merchandisers (e.g.: Carrefour, Wal-Mart, Tesco, …) – These “super stores” typically sell a wide
Merchandisers
variety of goods, including food items, housewares, and personal care products. They strive to operate on a low-price, high-volume basis and to minimize overheads. As a consequence, the level of service offered is lower than that of the two other channels. While mass merchandisers carry many different product categories, the depth of each product line is usually restricted to a few units. They often distribute the cheaper, lower-quality products. There are 15 chains of such stores, for a total of
12,500 outlets.
• Supermarkets (e.g.: 7/11, Franprix,…) – These stores are usually smaller and also belong to organized chains. They are geographically close to their customers (in shopping centers or downtown areas) and can provide a higher level of customer service. As they do not distribute as many different product categories, Yumites account for a large proportion of their sales. These stores usually carry a broad product line for each category, including the most expensive and/or high-performance products. Twenty-five chains exist in this category, representing 2,000 stores.
• Specialty chain stores (e.g.: Fauchon, Hédiard, Holland & Barrett, …) – These stores are characterized by the wide product assortment they offer. They usually have a significant amount of space displaying
Yumites, often with a specific counter or display dedicated to each major manufacturer. They provide extensive customer service. Specialty chain stores are often organized so that they have a degree of power in negotiating margins with manufacturers. Eight such chains with a total of 6,000 stores are identified in the Markops Online world.
3.7.2 Internet Distribution Channels – E–Tailers
In addition to the traditional distribution channels described above, you also need to consider the marketing opportunities offered by the Internet.
• E-Grocers’ Web Sites – These sites offer Yumites lines along with food and other merchandise sold in the site owners’ establishments. The Markops Online world starts with approximately 10 of these merchandisers in period 0.
• E-Boutique Sites – These sites are specialized in Yumites and dedicated to highlighting the range of
Yumites available, focusing on the more expensive, upscale brands. Fifteen such sites exist in Period
0.
All these various portals and sites have different characteristics in terms of image, awareness levels, financial strength, range of products offered, price ranges, the selling mechanisms applied (up-selling, cross-selling, automated replenishment, ability to purchase online), the customer base (proportion of each segment likely to visit the site), etc.
3.8 Margins and Discounts
When deciding on which channels are the most appropriate for the distribution of your brands, you will have to take into account margins and discounts. The margin is the percentage of the price paid by the consumer that is retained by the store. Differences between margins obtained by the stores in each of the channels are mainly due to differences in the level of service and volume sold. The discount is the percentage of reduction that a store will offer to its clients. Although discounts vary over time, most stores or sites comply to the general guidelines established by the chains.
Figure 12 summarizes margins and discounts in the Markops Online world, and gives an example for a $10 product. As explained later, you have the ability to modify the margin by plus or minus 10% if you feel this would be a useful marketing tool.
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Mass Merchandisers
& e-Grocers
Average Margin
Average Discount
Example
Recommended Retail Price
Price Paid by Consumers
Margin
Firm Revenue in $
In % of Rec. Retail Price
Supermarkets
35 %
10 %
40 %
5%
$ 10.00
$ 9.00
$ 3.15
$ 5.85
58.5 %
Specialty chain stores & eboutiques
50 %
None
$ 10.00
$ 9.50
$ 3.80
$ 5.70
57.0 %
$ 10.00
$ 10.00
$ 5.00
$ 5.00
50.0 %
Figure 12 – Summary of distribution channels’ margins and discounts
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ANAGING
4 MANAGING YOUR FIRM
Your team is responsible for the design and implementation of the marketing strategy of your firm. You will have to decide the overall orientation of the company regarding:
• the product portfolio strategy – which brands the company is going to develop and market;
• the segmentation and positioning strategy – which market segments will be targeted and how products will be positioned;
• the marketing mix strategy – the day-to-day operational marketing decisions such as pricing, production, communication and distribution.
You will manage your area as a profit center, and your performance will be measured by the following indicators: net contribution generated, brand market shares, your ability to grow the firm’s revenues, quality of R&D projects successfully developed, etc. Finally, the best measure of your company's success will be its
Stock Price Index, a measure that takes all of the above indicators into account.
This chapter describes the decisions you will have to make each period. Before making dramatic changes, you should try to get a feel for the behavior of the market. Do not jump hastily to conclusions and bear in mind that obvious solutions may be based upon an incomplete analysis. To reach more robust decisions, use the information from market studies to analyze your situation and past competitive behavior.
4.1 Formula Discovery
A key aspect of running your firm will be the launch of new brands or the improvement of existing ones, using new formulas discovered by your R&D department. You are not able to influence the attributes of new or improved products, and you do not have to make any specific decisions in order to discover new formulas. products decisions
Your R&D department does this without your intervention. As R&D discovers new formulas at a rate of one to three per period, these will be submitted for your consideration, in a chart such as the one of Figure 13.
In order to identify and keep track of the various formulas discovered over time, they are named with codes such as “C02B-Ini”, “C06E-Impr” or “C12H-Cost”, in accordance with the following pattern:
C
•
•
B
“C” as
Chewy
•
•
02
Project
Rank
Active
Ingredient
–
Ini
Type of project “C” indicates the name of the firm: “Chewy”.
C
“02 indicates the chronological rank of the formula. All formulas generated by Chewy’s R&D
02”
02 department have a sequential number from 01 on.
“B” is the code of the active ingredient of this formula, such as “Vitamin A”, “Potassium salt”, etc.
B
Several formulas can be based on the same active ingredient, with varying features or based costs, as explained below.
“Ini means that this is the initial formula for active ingredient “B”. A formula could also be designated
Ini”
Ini
“Impr meaning Improved. Such formulas have the same active ingredient designation as a previous
Impr”,
Impr one, but represent an improvement in one or more of the physical attributes. Finally, a formula could be designated “Cost for Cost reduction. Such a formula is identical to the previously launched one,
Cost”,
Cost but the production unit cost has been reduced thanks to production rationalization.
For example, Chewy may find the following series of formulas coming out of R&D:
C01A-Ini
: Initial formulation of active ingredient “A” ;
C02B-Ini
: Initial formulation of active ingredient “B” ;
C03C-Ini
: Initial formulation of active ingredient “C” ;
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C04B-Impr : Improvement of the original “B” formula, with upgraded physical attributes;
C05A-Cost : Cost reduction of “A” formula, with physical attributes unchanged;
C06B-Cost : Cost reduction of the “B” formula, which had already been improved;
Figure 13 shows the list of formulas discovered during the sample run. All these formulas are available for development. Figure 13 – R&D Report : Discovered Formulas
4.2 Formula Development and Brand Portfolio
As successive formulas are discovered by your R&D department, you have the option to use them if you feel they would make a useful addition to your portfolio. If you choose to use the formula, it must be developed into a product. The development phase lasts one period. In other words, if you request the development of a proposed formula, it will not be on the market before the following period. However, the decision to use this formula to launch a new brand or upgrade an existing one can be made as soon as the development is requested. Figure 14 shows the formulas that were developed during past periods of the sample run. As you can see in the second column, some of these formulas are already being used as the basis of a marketed brand; for instance, CANDY based on C02B-Ini or CAKE based on C03A-Cost. The other ones can be used to upgrade an existing brand or to launch a new one; for instance: C04C-Ini.
Figure 14 – R&D Report: Developed formulas
The Main screen to enter Brand Portfolio decisions is shown in Figure 15. The first decision is whether or not you choose to develop any formula in this period. If so, a drop-down screen will allow you to select amongst the formulas which have been discovered but not yet developed. Due to resource constraints in the R&D department, you may only develop one formula per period, even if more than one has been discovered.
You may then decide to launch a new brand or to upgrade an existing one with one of the formulas already developed, or with the formula you just decided to develop. If you click on Introduce, a second screen will
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allow you to make decisions concerning your new brand, to be launched in the following period. This screen is shown in Figure 16.
The trademark department of your company will suggest a name for your new brand. In addition, you must establish an initial plant capacity level for the brand. Capacity refers to the maximum amount of the product which can theoretically be produced by your factory during one period. This is related to the size of the factory, the equipment level, speed of production lines, etc. You must decide on a level of initial capacity for any new brand, which will be in place one period later, upon launch. In the same way, any requested capacity increase for existing brands will take one period to become effective. Once built, capacity cannot be destroyed. Figure 15 – Brand portfolio decision screen
If instead of developing a new brand, you choose to upgrade an existing one, do so by first selecting the brand in the list of Figure 15, for instance CANDY, and then by clicking on the Upgrade button. The same screen as the one in Figure 16 pops up to let you select the correct formula in the drop-down menu.
Whenever you make these decisions, the screen of Figure 15 lists the brand portfolio elements in the current period, and the next one, based on the changes you have just decided.
Figure 16 – Brand launch or upgrade decision screen
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Keep an eye on inventory level or stock build up. If too much inventory has built up, it is obvious that production levels should be decreased as a consequence. If a product is modified by means of an improved or cost-reduced formula, all inventory of the old formula is disposed of as it is considered obsolete. This implies
1) a disposal loss, calculated at 125% of current base cost; and 2) that any improved product begins with zero inventories, although the pre-existing capacity levels remain unchanged.
Timing is a critical issue in formula development and brand portfolio decisions. It is important to note that both decisions take one period to take place, but that they can be done in parallel. The table below shows two concrete examples.
COST REDUCTION OF CAKE
Period
0
•
•
Period
1
•
•
•
•
Period
2
•
Brand CAKE is marketed, based on formula C01A-Ini.
Formula C03A-Cost is discovered by
R&D.
Decision to develop C03A-Cost is made. Development takes place and is completed during Period 1.
Decision to upgrade CAKE based on
C03A-Cost is made.
The upgrade is prepared during Period
1 (change in manufacturing processes, marketing materials…) but it is not effective before Period 2.
All inventories of brand CAKE existing at the end of Period 1 are disposed of because they are based on the old formula C01A-Ini.
Brand CAKE is now based on formula
C03A-Cost, with a reduced cost.
INTRODUCTION OF COCOA
Period
2
•
Formula C04C-Ini is discovered by
R&D.
Period
3
•
Decision to develop C04C-Ini is made.
Development takes place and is completed during Period 3.
Decision to introduce COCOA based on
C04C-Ini is made.
Decision to build a new factory of 8,000 units for COCOA is made.
The introduction is prepared during
Period 3 (construction of the new plant, marketing materials…) but it is not effective before Period 4.
Brand COCOAL is launched based on formula C04C-Ini.
•
•
•
•
Period
4
4.3 Brand Management
Your team must make a number of decisions each period concerning the management of the brands in the portfolio. The Brand Management screen shown in Figure 17 contains the fields needed to enter these decisions. Management time. You need to indicate, for each brand, the management time you wish to devote to it. time Management time decisions are given in number of person-months. For instance, allocating 180 personmonths to brand CAKE is equivalent to having a team of 30 managers working full-time for the 6-month period. Allocating management time to a brand or a channel is necessary to implement large scale projects such as introducing or improving a brand, but also for the day-to-day management activities. Increasing the size of your task force will have a positive impact on how your other resources are used: advertising budgets, trade marketing budget, etc.
Price.
Price Based on your analysis of the market conditions and competitive offerings, you can set the retail price of your brand for the coming year. This is the retail price paid by consumers, so remember to take into account the margins paid to distributors, as explained in Figure 12.
Capacity.
Capacity In this area you are reminded of your capacity level for each brand in the current period and given the option to build additional capacity. Remember that building new capacity will take one period, so you have to plan capacity increases in advance.
Production.
Production In this field you indicate how many units of the product you actually want the plant to manufacture. This number can be any level up to the current capacity. It may be that capacity requested last
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period turns out to be not needed, as the market has become more sluggish. In such a case, you may need less production than capacity.
Your factory will adjust production levels to allow you a margin of plus or minus 20%, depending on your actual level of sales. For example, if you ordered 10,000 units of production, but only were able to sell 7,000, the factory will scale down production to 8,000 (-20%), leaving you with inventory of only 1,000 units. On the other hand, if there is a demand of 14,000 units for your brand, production will stretch to 12,000 (+20%), resulting in lost sales of only 2,000.
Figure 17 – Brand management decision screen
Advertising.
Advertising You must make two advertising decisions each period. Firstly, you should determine the advertising media budget allocated to each brand. This budget will be used to purchase media space and time. Your advertising agency will select automatically the most appropriate media that targets the most relevant segments for the brand.
Secondly, you must specify the budget allocated to advertising creation. This finances the advertising research, creative work, media selection, and other activities conducted by advertising agencies which improve the quality of your message. In past years, companies have devoted on average 7% of their total advertising expenditures to advertising creation. Advertising creation will usually make your advertising more effective, and is especially important when you introduce a new brand or when you look to reposition an existing one. In these last two instances, higher percentages are recommended, in the range of 15 to 20%.
Positioning.
Positioning An essential part of your marketing effort will involve delivering the appropriate messages to the various segments, in line with what they expect, and considering what your brand has to offer. Using the
Semantic scales study and the relevant Brand maps (see Market Studies section for more information on
Semantic Scales), you can decide on the content of your advertising, along two of five dimensions:
Performance, Nutrition, Packaging, Flavor or Price.
Making positioning decisions is fairly easy. You should first choose one or two dimensions amongst the ones that are most relevant to the targeted segments. The Semantic scales study will give you the relative importance of each dimension for a specific segment. As you can see in Figure 17, team Sample decided to use Flavor and Performance for brand CAKE. Then, you must determine what is the ideal position where you would like to be positioned on the corresponding Brand Map. An example of such a map is given in Figure 29.
As you can see, team Sample decided to position brand CAKE at a position (6, 6.7), close to brand WARM, probably because this brand is successful with CAKE target segments.
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There are limits to how far you can position or reposition a brand. These limits depend on the intrinsic attributes of your brand, on its price and on the advertising media and creative budgets you allocate to it.
Figure 18 – Channel management decision screen
4.4 Channel Management
Decisions are also required, on how you will manage your relationships with traditional as well as online channels. These are captured on the screen in Figure 18. Here you can indicate the management time (in person-months) to be dedicated to each channel, as well as several aspects of trade marketing.
Marketing.
Trade Marketing This includes the referencing budgets plus additional features such as in-store reps, showwindow and in-store location display materials, product sampling displays, etc. These features are used to provide to outlets the means to enhance sales. Thus, you should obtain a better push from distributors if you increase the trade marketing budgets. Note that cutting this budget to 0 means: “do not distribute our brands in this channel”.
Promotion. This includes all the traditional promotional tools such as free gifts, 2 for 1 offers, samples,
Promotion
coupons, etc. Your staff will automatically select the tools that are most appropriate for the target segments.
Increasing promotion will push consumers to try your brands. However, beware of increasing promotion too much as this may have a negative impact on the brands’ image, especially for high-end segments.
Margins.
Margins Each channel type is typically given a certain margin of the retail price, set at 50% for Specialty Chain
Stores, 40% for Supermarkets, and 35% for Mass Merchandisers (see Figure 12). You have the option to provide more or less than these guidelines, within a range of plus or minus 10%. Thus you can propose a 48% margin to Supermarkets if you feel they will make an extra effort as a result, which will translate into higher sales for you.
Priority.
Brand Priority You must decide, for each channel, the proportion of effort that will be dedicated to each brand. 4.5 Ordering Market Studies
One of your decisions will be to order market studies. All studies are ordered at the beginning of a period and are conducted by a specialized research firm during that period. The results are delivered with your annual report at the end of the period.
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All studies you purchase will be made available on paper and/or on screen. The information provided is relevant to the market situation during the analyzed period, with the exception of the market-forecast study.
The list of available studies is given in Figure 19. All studies are detailed further later in this document. To order a study, simply check the box “Purchase next period”, next to the study title. Remember that studies ordered in Period N will be available in your Period N+1 report.
Figure 19 – Ordering market research studies
4.6 Budget
Each period, your division will be given a total budget to spend. A minimum applies, so that even if your results wer not good during the last period, you will still be able to function with a reasonable level of activity.
Similarly, there is a maximum, as available resources are allocated to other divisions in the case of a very successful period. Those minimum and maximum levels are indicated in the Newsletter.
The budget screen of Figure 20 shows a summary of what has been spent via decisions made in all the previous screens. It also compares your total costs to the available budget and indicates the positive or negative deviation.
Note that you will not be authorized to submit your decisions to the Instructor if you exceed your budget.
Additional screens are available which provide budget details by brand and by channel.
Figure 20 – Comparing expenses with available budget
4.7 Setting your Team Name
There is one decision which will be available to you only once, during your first round of decisions: setting a new name for your team.
You can do so very easily by clicking on Decisions/Set team name in the Markops Online menu, and then entering the name you would like to use in the cell shown on Figure 21. Your team name should not exceed
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twelve (12) characters. Make sure you do not forget to change your name during the first decision round if you do not want to find yourself with a name such as TEAM11 for the rest of your Markops Online course!
Figure 21 – Setting your team name
4.8 Decision Highlights
Upon request, the Markops Online software will make a quick analysis of your decisions and check a number of points. The report of this analysis can be obtained by selecting Decision highlights in the Decisions menu.
It includes three sections.
• Errors These are the very important points which you cannot ignore; otherwise you will not be able to
Errors.
submit your decisions for a run of the simulation. Typical errors include: decisions not yet made; being over-budget; marketing a brand with no manufacturing capacity; forgetting to set a new team name; etc.
• Warnings These are the points that may have been done on purpose but could also be potential
Warnings.
errors. Typical warnings include; dramatic price increase or decrease; developing a formula but not using it to introduce or upgrade a brand; etc.
• Highlights These are the most important points of your decisions. They are listed to so that you can
Highlights.
check you meant to make the corresponding decisions were made on purpose. Typical highlights include: introducing a new brand; upgrading an existing one; developing a formula; etc.
Please ensure that you check the screen Decision highlights at regular intervals as you do not want to find yourself with 15 or 20 errors 10 minutes before the closing deadline …
4.9 Past Decisions
At any time during the course of the Markops Online exercise, you will be able to browse through your past decisions by selecting Past decisions in your Decisions menu.
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5 YOUR ANNUAL REPORT
You will have access to your annual report at the beginning of each decision round. The annual report provides you with the results of the period that has just ended. For instance, you will be making decisions for period 4 based on the annual report of period 3. The annual report is composed of three separate sections: the Company Report, the Newsletter and the Market Studies. Screenshots of the most important tables and charts are included in this chapter. For more tables and charts, please refer to the annual report that you will receive at the beginning of the simulation exercise.
5.1 Newsletter
The Newsletter provides general and financial data on the industry, on the competing firms and on marketed brands. The Newsletter consists of the following charts.
Company Key Performance Indicators – The screen shown in Figure 22 provides comparative charts with various financial and marketing performance indicators such as: market shares, retail sales in the various types of channels, current and cumulative contributions, stock price indices and return on investment ratios.
All numbers are given in absolute values or as percentages.
Figure 22 – Newsletter : Company Key Performance Indicators
The financial and marketing indicators are well-known and do not need additional explanation. The shareholder value indicators are described below in more details.
• Market Capitalization This is the value of the company, calculated by multiplying the stock price by
Capitalization.
the number of outstanding shares. For simplification reasons, you can assume that there will be no change in the capital structure of the companies, e.g. no issuance of additional stock. Thus, the variation in the Market capitalization is a good representation of how companies are valued by investors. Although it is not always easy to understand the variations of stock price, the main drivers of market capitalization are revenues and profits. The best way to increase your stock price is to grow revenues and profits with no fluctuations.
• Stock Price Index (SPI). This is a simple measure used to monitor the variation of your stock price and to compare it with those of your competitors.
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Market Capitalization at period P
Market Capitalization at period 0
All competitors have a SPI of 1000 in Period 0. Then, if the SPI increases, it means that the company created shareholder value. If the SPI decreases some value was destroyed.
• Current Return On Investment (ROI). The current ROI is defined in Markops Online as
Net Contribution
Net Contribution
=
Current ROI =
Marketing Expenditures
CBM – CAM where CBM is the Contribution Before Marketing and CAM is the Contribution After Marketing.
• Cumulative Return On Investment (ROI). The cumulative ROI is derived from the current ROI. It is defined as:
Cumulative Net Contribution
Cumulative ROI =
Cumulative Marketing Expenditures
Characteristics
Characteristics of Marketed Brands – This section details the physical characteristics, price, and unit cost of all marketed products, and it indicates which brands have been recently improved upon or introduced.
Brand Sales and Market Shares – Here you will find market shares, in units and in dollar value, the volume sold and the retail sales of all brands. Volumes and retail sales are given in absolute values and in percentage change from the previous period.
Cost of Market Research Studies – This chart gives the list of available market research studies and the corresponding costs. Note that you must order studies each period in order to get up-to-date information.
Financial Data – The evolution of economic variables are highlighted in this part of the Newsletter. Various costs relative to production, management time, budget and General & Administrative overheads are also provided. SPI at period P = 1000 x
5.2 Company Report
The Company Report provides confidential information regarding the results of your company. This information will allow you to assess the impact of decisions made and review the level of success or lack of success of the strategies put into place. The company report includes the following charts:
Firm Results – This section describes your firm’s financial performance, in the form of a simplified P & L
Statement. All numbers are given in absolute values for the current period and the previous one, and in percentage change from the previous one as well. The screen is depicted in Figure 23 and is detailed below.
• Retail sales : total sales paid by consumers.
• Revenues : retail sales minus distributors' margins.
• Cost of goods sold : number of units sold x Average unit cost.
• Inventory holding cost : units in inventory x unit transfer cost x inventory holding cost in %, as given in the Newsletter.
• Contribution before marketing (CBM) : Revenues – Cost of goods sold – Inventory cost
• Contribution after marketing (CAM) : CBM – (Advertising + Promotion + Trade marketing).
• Production fixed costs : Production capacity x Fixed cost in $/Unit as given in the Newsletter.
• Management time costs : Sum of managers’ operating, hiring or firing costs. Managers costs are indicated in the Newsletter.
• Exceptional costs or profits : Include exceptional items such as brand withdrawal costs. These exceptional items are fully explained with messages from the simulation when they occur.
• Brand contribution : CAM – Other costs.
• Corporate costs : Here are included R&D costs (discoveries and developments), Market studies, and
General and Administrative costs. G&A costs are overhead costs calculated as a percentage of revenues plus a fixed amount per brand and per channel used, as indicated in the Newsletter.
• Next period budget : Calculated as 40% of revenues, with a minimum and a maximum, as explained in the Newsletter.
Copyright © 2005 by StratX
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Figure 23 – Company Report : Firm Results
Brand Results. This chart shows essentially the same information as the Firm Results chart, for the current period only, but broken down for each brand in the portfolio. Additional information is provided on units sold, average unit retail and selling price, and total number of units produced.
Market Shares & Distribution Coverage. This screen provides information on the way in which each of your brands is represented in the various distribution channels. It indicates each brand’s total market share in units and in value, as well as the percentage of each type of distributor which carries your brand.
Discovered Formulas. This chart, depicted in Figure 13, is a listing of the formulas that have been discovered by your R&D department but have not yet been developed for use as brands. For each one, you can see its physical characteristics, initial base cost as well as the minimal base cost which can be achieved when 40 million units will have been produced. Also given is the cost to develop the formula, if you so choose.
Keep in mind that R&D will continue discovering several formulas per period. Based on your analysis of the data in this chart, you need to decide which, if any, you wish to develop in the current period.
Developed Formulas. This is simply a summary of those formulas you have already developed for use as brands in your portfolio. See an example of this chart in Figure 14.
Messages. Finally, this screen contains messages from the simulation regarding events which have taken place, such as new formula discoveries or developments, and reminders of essential steps which need to be taken. Figure 24 – Company Report : Messages from the simulation
Copyright © 2005 by StratX
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5.3 Market Studies
You may purchase up to 7 studies each period. The list below provides a brief summary of the information provided by each study. Check your annual report for a full listing of the studies. In addition, the software includes a few additional charts that are not included in the printed report so as to limit its size.
Consumer Panel – This study, depicted in Figure 25 provides the total unit sales for each segment; the relative size of each segment; and the market shares, based on units sold, for each brand in each segment.
Figure 25 – Consumer panel : Market shares
Consumer Survey – The consumer survey provides information on:
• the level of brand awareness: percentage of potential consumers in each segment who spontaneously recall a given brand name;
• shopping habits: percentage of potential consumers in each segment who prefer to shop and buy in a given distribution channel; see an example in Figure 26;
• brand purchase intentions: percentage of potential consumers in each segment who intended to buy a given brand.
Distribution panel – The distribution panel gives information on the total sales, in each distribution channel; the relative size of each channel; and the market shares, based on units sold, for each brand in each channel.
A second chart, depicted in Figure 27 provides the distribution coverage for each brand in each channel, i.e. the percentage of stores or web sites carrying a given brand. This information is given separately for both traditional retailers and Internet-based channels (e-Tailers).
Figure 26 – Consumer Survey : Shopping habits
Copyright © 2005 by StratX
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Figure 27 – Distribution Panel : Distribution coverage
Semantic scales – Semantic scales describe how consumers perceive the marketed brands. Respondents are asked to rate each brand along each physical characteristic on a scale from 1 to 7 according to the way they perceive the brand. For instance, a brand rated 2.3 on the FLAVOR scale is perceived as having less flavor than a brand rating 5.5 on the same scale. Similarly, consumers are asked to evaluate the importance of each characteristic, in other words, the weight each characteristic takes in the buying decision. A sample chart of the Semantic Scale study is depicted in Figure 28.
Additional charts and graphs are available online. For instance, you can obtain a graph, or Brand Map, showing the relative position of each brand on a graph whose axes can be set for any of the physical characteristics. This map, depicted in Figure 29 will allow you to see the differences in how brands are perceived and help you determine what needs to be done to correct their positioning (i.e. more or better communication, or improving the product; or both). Two brands close to one another on the map are perceived as being similar. Inversely, two brands located in different quadrants are perceived as being significantly different; for instance, one may be perceived as less nutritional or as having more flavor.
These maps will also allow you to determine the content of your advertising, as mentioned previously. If your brand is perceived as 3.2 in Flavor, and you feel it could be perceived higher, you can enter a ‘4’ on that dimension in the Brand Management screen of Figure 17. This will direct your ad agency to create messages that emphasize the appropriate level of Flavor.
Figure 28 – Semantic Scales : Brand Perceptions
Copyright © 2005 by StratX
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Figure 29 – Semantic Scales : Brand Map
Competitive Intelligence – This study estimates total advertising expenditures for each competitive brand by segment. It also provides the average advertising spending by brand and by firm, in total and for each segment. Further charts give estimates on how much was spent for each brand in Trade Marketing and
Promotion, for each traditional and online channel.
A sample chart is shown in Figure 30. This data will be essential in explaining past performance or to determining suitable spending levels for the current period.
Figure 30 – Competitive Intelligence : Advertising budgets
Benchmarking – In this section you will find a comparison of key figures and financial results for the various companies in the Markops Online world. The available data is fairly comprehensive and is presented in the same format as the Firm Results chart, given in Figure 23.
Copyright © 2005 by StratX
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Market Forecast – This research study estimates the expected size in units and the growth rate of each segment for the next three periods. Similarly, estimates are given for the expected growth of the channel sizes over the next three periods, as shown in Figure 31. These estimates are based on the current market situation and assume that no substantial changes such as brand introductions, or significant price increases or decreases will take place in the future. Consequently, depending on what actions are actually taken by your firm and your competitors, the resulting market size will either be higher or lower.
Figure 31 – Market Forecast : Channel sizes and growth rates
Finally, this study also provides the new brands expected to be launched by your competitors in the upcoming periods. See Figure 32 for an example.
Figure 32 – Market Forecast : Expected new brand launches by competitors
Copyright © 2005 by StratX
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6 FINAL RECOMMENDATIONS
It is important that you carefully read and understand the information in this manual before the beginning of the simulation exercise. From previous use of Markops Online in a classroom environment, we have found that you will benefit by paying particular attention to the following advice.
• Emphasis on strategic issues. Concentrate your efforts on strategic issues and long-term planning.
The emphasis of the simulation is not on short-term activities, such as promotions or discounts.
• Importance of analysis. Before making decisions, be sure that you understand the behavior of the market. Do not jump to the first explanation, or conclusion, that you may have reached when faced with a problem: it may be incomplete. The detailed analysis of Market Research Studies, of your own situation and of past competitive behavior should help you reach more robust decisions.
• Group time allocation. Make sure that you allocate your discussion time sensibly between problem areas. You will be under pressure to submit your decisions by the given deadline, and you should avoid making decisions hastily in the last minutes available. Do not waste time on discussing a
$100,000 expenditure if it will force you to rush through other decisions where millions of dollars are at stake.
• Decision input errors. Your team will have to bear the consequences of errors made in entering your decisions using the Markops Online software. These errors cannot be corrected after the run has been requested. Be particularly careful to specify your decisions in the correct units and to submit your decisions on time.
• Role of the instructor. The Markops Online instructor cannot manipulate the simulation parameters during the course of the simulated periods. The simulation has been designed to automatically generate environmental changes. The markets will evolve mainly according to the actions taken by the competing firms. There will, thus, be no interference by the instructor in favor of or against any team, and you should feel entirely responsible for your firm's performance.
In the final analysis, you will soon realize that, even though you have access to extensive marketing information, your judgment has to play an important part in making your decisions. As in most real business situations, there is no single specific solution to any of the problems that you will encounter. There are, however, alternatives that will clearly appear inferior after good analysis of the situation. There are other alternatives that will appear satisfactory but for which the relative merits depend mainly on the uncertainties of competitive actions. In this case, you will have to anticipate likely competitive behavior and to make choices under uncertainty. Over a series of decisions, sound analysis and good judgment will inevitably bear fruit.
We hope that participating in the Markops Online simulation will give you a better understanding of strategic and operational marketing concepts, and that you will enjoy this learning experience!
The StratX Team
Copyright © 2005 by StratX
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Copyright © 2005 by StratX
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Markops Online ID Card
Copyright © 2005 by StratX
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Partner, Chief Science Officer
STRATX
……………………………………………………………………………………….. i Publisher: STRATX
Publisher: STRATX
Logo Design: Synergy Network, Waltham, Massachusetts
Website Design: Business Lab, Paris France
Marketing Team - Americas: Lucy Jacobus, Paul Ritmo
Marketing Team – Europe, Middle-East, Asia, Africa: Sabine Fabbricatore, Laura Manceron
Development Team: Rémi Triolet, Didier Drobecq, Aurélien Dauvergne, Christophe Pottier
Copyright ©2005 by STRATX
Software © 2005 by STRATX
ALL RIGHTS RESERVED
No part of this book may be reproduced in any form, electronic or mechanical, without the prior permission of the publisher.
ISBN# 0-9743063-2-0
Version 1.0
……………………………………………………………………………………….. ii Contents
Introduction…………………………………………………………………………………………………………v
About STRATX………………………………………………………………………………………………………vi
About the Author…………………………………………………………………………………………………vii
Questions and Technical Support……………………………………………………………………………viii
1
REGISTRATION AND SOFTWARE SETUP................................................... 1
1.1
1.2
1.3
1.4
2
MAKING DECISIONS WITH MARKOPS ONLINE.......................................... 5
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
3
Formula Discovery ....................................................................................................... 16
Formula Development and Brand Portfolio ................................................................... 17
Brand Management ...................................................................................................... 19
Channel Management .................................................................................................. 21
Ordering Market Studies .............................................................................................. 21
Budget......................................................................................................................... 22
Setting your Team Name.............................................................................................. 22
Decision Highlights...................................................................................................... 23
Past Decisions.............................................................................................................. 23
YOUR ANNUAL REPORT ............................................................................ 24
5.1
5.2
5.3
6
Introduction................................................................................................................. 11
Your Role..................................................................................................................... 11
Overview of the Markops Online Industry..................................................................... 11
Product Profiles ........................................................................................................... 12
Naming Conventions ................................................................................................... 13
Consumers .................................................................................................................. 13
Distribution Channels .................................................................................................. 14
Margins and Discounts ................................................................................................ 14
MANAGING YOUR FIRM.............................................................................. 16
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
5
Overview........................................................................................................................ 5
Authenticating ............................................................................................................... 5
Self-assigning to your team........................................................................................... 6
Downloading your Team File from the Markops Online server........................................ 7
Organizing a Markops Online working session............................................................... 7
Saving your team file on the Markops Online server....................................................... 8
Working in an environment with limited access to Internet ............................................ 9
Submitting your Decisions for Run................................................................................. 9
Checking your Course and Team status on the Markops Online server......................... 10
Starting your next Decision Round and Accessing your Team Rankings ................... 10
OVERVIEW OF THE MARKOPS ONLINE WORLD ..................................... 11
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
4
The Registration Process................................................................................................ 1
Downloading and Installing the Team Software.............................................................. 2
Practicing using the SAMPLE File .................................................................................... 3
Using the Tools menu to test your installation ............................................................... 3
Newsletter ................................................................................................................... 24
Company Report .......................................................................................................... 25
Market Studies............................................................................................................. 27
FINAL RECOMMENDATIONS ...................................................................... 31
…………………………………………………………………................... iii Table of Illustrations
All figures in this manual are from a sample file obtained during a past run of the Markops Online simulation. They are included to provide examples of charts, tables, graphs or input screens. Please note, the market situation used for these examples is different from the one which you will face.
Figure 1 – Sample Markops Online ID card _________________________________________ 1
Figure 2 – Installing Markops Online Team Software_________________________________ 2
Figure 3– Modifying your Proxy Settings __________________________________________ 4
Figure 4 – Authenticating _______________________________________________________ 6
Figure 5 – Self-assigning to your team ____________________________________________ 6
Figure 6 – Opening your team file ________________________________________________ 7
Figure 7 – Saving your team file on the Markops Online server ________________________ 8
Figure 8 – Submitting your decisions for run _______________________________________ 9
Figure 9 – Checking Course and Team status on the Markops Online server____________ 10
Figure 10 – Physical attributes of marketed brands_________________________________ 12
Figure 11 – Reduction of production cost as a function of cumulative production _______ 13
Figure 12 – Summary of distribution channels’ margins and discounts ________________ 15
Figure 13 – R&D Report : Discovered Formulas ____________________________________ 17
Figure 14 – R&D Report: Developed formulas _____________________________________ 17
Figure 15 – Brand portfolio decision screen _______________________________________ 18
Figure 16 – Brand launch or upgrade decision screen ______________________________ 18
Figure 17 – Brand management decision screen ___________________________________ 20
Figure 18 – Channel management decision screen _________________________________ 21
Figure 19 – Ordering market research studies _____________________________________ 22
Figure 20 – Comparing expenses with available budget _____________________________ 22
Figure 21 – Setting your team name _____________________________________________ 23
Figure 22 – Newsletter : Company Key Performance Indicators_______________________ 24
Figure 23 – Company Report : Firm Results _______________________________________ 26
Figure 24 – Company Report : Messages from the simulation ________________________ 26
Figure 25 – Consumer panel : Market shares ______________________________________ 27
Figure 26 – Consumer Survey : Shopping habits ___________________________________ 27
Figure 27 – Distribution Panel : Distribution coverage ______________________________ 28
Figure 28 – Semantic Scales : Brand Perceptions __________________________________ 28
Figure 29 – Semantic Scales : Brand Map _________________________________________ 29
Figure 30 – Competitive Intelligence : Advertising budgets __________________________ 29
Figure 31 – Market Forecast : Channel sizes and growth rates _______________________ 30
Figure 32 – Market Forecast : Expected new brand launches by competitors ___________ 30
…………………………………………………………………................... iv Introduction
Markops Online is the latest STRATX simulation.
As with every StratX simulation, Markops Online places real market forces at the heart of the learning experience. Markops Online focuses on operational marketing, while keeping the key principles of strategy at the heart of decisions. It's all about giving participants a platform from which to apply their ideas, and the security to build skills with confidence.
Used in combination with traditional training methods such as conceptual sessions or case studies,
Markops Online is a highly effective tool to learn operational marketing concepts, such as brand management, channel management, communication and promotion or pricing strategy.
It also covers key strategic marketing concepts such as brand portfolio strategy or segmentation and positioning strategy.
Similar to a flight simulator, this marketing simulation allows students and managers to practice new skills in an intensive time frame and in a risk-free environment before trying them out in a real business environment.
The mathematical model of Markops Online is based on solid theoretical foundations, and the underlying formulas have been extensively tested. This simulation has been used to successfully train a large number of students and executives from many universities and organizations.
Several months of development have been necessary to develop the Markops Online simulation, which benefits from StratX’ extensive experience in the field of business simulations. In particular, StratX is the author of the Markstrat Online simulation, which was originally developed more than twenty years ago by Jean-Claude Larréché, Alfred H. Heineken Professor of Marketing at INSEAD, and Hubert
Gatignon, The Claude Janssen Chaired Professor of Business Administration and Professor of Marketing at INSEAD.
During the Markops Online exercise, you and your team will be given a company and product portfolio to manage in a dynamic and interactive environment. No previous computer experience is required but it is important to prepare by reading this handbook prior to beginning your course. If you do not read it carefully, you will run the risk of putting your team at a competitive disadvantage!
…………………………………………………………………................... v About STRATX
StratX is a unique consulting and management development group that brings together disciplines from leading business schools, management consultants and learning design specialists. Founded by
INSEAD Marketing Professor, Jean-Claude Larréché, our aim is to help leading international corporations achieve their business objectives along three dimensions: strategic change facilitation; marketing skills and capabilities development; and marketing excellence and customer centricity.
Moreover, our approach mobilizes a group of individuals behind a common goal with a common language to achieve results. StratX offers training solutions that include advanced business simulations, interactive concept discussions, team project work and a host of other traditional and online learning opportunities.
Over the past twenty years, our R&D team has designed and developed a portfolio of world-class business simulations, including Markstrat 3 and Markstrat Online, used in over 500 business schools and universities throughout the world. StratX has also developed the L’Oréal e-Strat simulation, used each year since 2001 during the L’Oréal e-Strat Challenge, an on-line interactive, simulation-based competition during which thousands of teams run a Cosmetics company and compete for a chance to sell their virtual company to a board of L’Oréal executives.
Our world-wide network of StratX consultants work with clients such as L’Oréal, General Electric, Pfizer,
Siemens, ABN AMRO, Novartis and Boeing.
…………………………………………………………………................... vi About the Author
Rémi Triolet holds a master's degree in computer science from ENSIMA, an engineering school in
Grenoble (France), and a PhD in mathematics from Paris-VI University and Ecole Supérieure des Mines de Paris.
Just after his graduation, Rémi worked in a research team at Ecole Supérieure des Mines de Paris and then at Morpho-Systems, a medium-size French company leader in the automated recognition of fingerprints. His main interest at that time was the design of efficient numerical algorithms for supercomputers. Rémi joined StratX in 1991 to work in close cooperation with Professor Jean-Claude Larréché on the design and development of new leading strategic simulations such as "MARKSTRAT-PHARMA",
"MARKSTRAT-SERVICES", "MARKPRO Business-to-Business", "GAMAR3", etc.
Important milestones in Rémi's carreer at StratX were the design of "MARKSTRAT3" and "MARKSTRATONLINE", two versions of our star simulation, licensed in over 500 business school around the world, and of "E-STRAT", a web-enabled simulation developed for L'Oréal and used to run a global competition with over 30,000 business school and university students.
…………………………………………………………………................... vii Questions & Technical Support
This manual has been designed to be as clear and complete as possible. However, the Markops Online simulation is fairly complex and we know by experience that some topics will require additional explanation. If you have questions regarding this handbook or the simulation we suggest that you follow the steps below.
Check the Frequently Asked Questions (FAQs) available for download on the www.markopsonline.com web site. Other students may have already asked a similar question, checking the FAQs will help you save time. If you do not find the response to your question in the FAQs, please contact your instructor.
As most instructors prefer to keep the full content of their course, StratX’ policy is to not respond directly to student’s questions.
Responses to frequently asked questions do not address specific team situations and do not provide advice or hints on strategy, management, marketing, finances or any other topic. For these subjects, you should only count on your knowledge, ideas and experiences (or those of your team…)
Here are some examples of questions already addressed in the FAQs:
• What is the formula for the Stock Price Index?
• How can I know the fixed production cost for each brand?
• Is Markops Online compatible with Windows XP?
…………………………………………………………………................... viii 1 REGISTRATION AND SOFTWARE SETUP
You will have to go through a few easy administrative steps before you are able to make your first set of decisions with Markops Online. Please read carefully the following pages as it is important that you perform these steps in the appropriate order and at the right time.
The tasks to perform are listed below and are explained in more detail in the following pages.
• Purchasing your own copy of this handbook and registering on our web site;
• Downloading and installing the Markops Online team software;
• Testing your installation and discovering the Markops Online environment with the SAMPLE file.
1.1 The Registration Process
1.1.1 Why register
The usage of Markops Online is strictly reserved to registered students. The registration process will allow you to be uniquely identified in the Markops Online remote database. The username and password that you have chosen at registration will authenticate you when using the Markops Online software.
Registration is absolutely mandatory. As explained in chapter 2 you and your team will have to exchange data back and forth with the Markops Online server during your course. For obvious security reasons, you will have to be fully authenticated before you are allowed to transfer data to or from the server.
1.1.2 How to register
Step 1: Buy your own copy of this handbook, which comes with a license number allowing you to access the
Markops Online web site and team software. If the handbook is provided to you by your teaching institution, your Markops Online instructor will provide you with a license number and course ID at the beginning of your course. You will find on the last page of this book a blank Markops Online ID Card (see Figure 1).
ONLINE
FILL IN YOUR PERSONAL MARKOPS ONLINE ID CARD AND KEEP IN A SAFE PLACE.
Figure 1 – Sample Markops Online ID card
The license number given to you by your instructor is unique. It is required to register on the Markops Online web site. You can write it down on the front of this card.
…………………………………………………………………...................
1
Step 2: Go to www.markopsonline.com, select the Registration section and follow the instructions carefully.
You will be asked to choose a username & password and to enter your course ID and your license number. If you do not yet know your course ID, leave the cell blank and continue; you will be allowed to enter it later.
The additional fields: Team ID and Team Password are explained in Chapter 2.
1.2 Downloading and Installing the Team Software
1.2.1 How to download the setup file
To download the software, visit our web site at http://www.markopsonline.com, type in your username and password in the Student Login section and select Downloads. You will find a series of hyperlinks to download the manual, the software setup file and to browse Frequently Asked Questions.
Click one of these links to initiate the download. Your browser may ask you whether you want to execute the file transfer directly from the site or save it to disk. Select the save to disk option and save the file on your local hard drive.
1.2.2 Computer Requirements
The minimum computer configuration required to operate the Markops Online software is the following:
• Pentium-based processor with 16 megabytes of memory;
• Hard disk with at least 20 megabytes of available storage;
• Windows 9X, Millenium, 2000, NT4, XP, 2003, or above.
• Internet connection (only during authentication and file transfers);
1.2.3 Installing the Software
You should now have on your hard drive a self-installable setup file named Markops Online Team Setup VX-XX-X.exe. Double-click on this file to start the setup procedure.
A window entitled Welcome to the InstallShield Wizard for Markops OnlineTeam pops up, as shown in Figure
2. Click on the Next button to continue the setup procedure.
A window pops up allowing you specify in which folder Markops Online should be installed. The default folder
C:\Program Files\STRATX\Markops Online, is indicated in this window. We strongly advise using this default folder as it will make your life easier and reduce the risk of errors. For instance, reading the FAQs will be simplified as we will always refer to the default installation folder. If you need to install Markops Online in another folder, click on the Browse… button.
The actual installation starts when you click on the Next > button. All files are copied into the folder which you specified. Two of these files are registered automatically in the Windows registry.
The setup utility creates a shortcut called Markops Online Team on your desktop. Double-click on this shortcut to launch the application.
Figure 2 – Installing Markops Online Team Software
…………………………………………………………………...................
2
1.3 Practicing using the SAMPLE File
If you want to test your installation and practice prior to the beginning of your first Markops Online decision round, you may do so with the SAMPLE file. This SAMPLE file is installed by default in your “My Markops Online
Files” folder when you install the Markops Online software. The password for this file is SAMPLE. This data file contains results for all rounds up to Round 3 and default decisions for Round 4, from a previous run of the
Markops Online simulation. It will allow you to practice using Markops Online, i.e. to browse through the results charts and graphs; to print a sample Annual Report; to enter each of the decisions screens; and to test your HTTP connection by using the Tools menu.
The SAMPLE file is a practice data file. The market situation which you will be faced with during your actual
Markops Online course will be substantially different. Similarly, the decisions you will find in this file are not the examples of the best ones that a successful team can come up with. Thus, our advice is:
DO NOT SPEND TOO MUCH TIME ANALYZING THE MARKET SITUATION OF THE
SAMPLE FILE. ANY DECISIONS MADE USING THE SAMPLE FILE WILL NOT BE
RUN THROUGH THE SIMULATION MODEL AND WILL BE IGNORED ONCE YOUR
COURSE STARTS. MOREOVER, THE INITIAL MARKET SITUATION WHICH YOU
WILL HAVE TO ANALYSE ONCE YOUR COURSE STARTS WILL BE DIFFERENT.
1.4 Using the Tools menu to test your installation
1.4.1 Testing your connection
Clicking on Tools/Test your connection will initiate the authentication process on the Markops Online server and test if your Internet connection works properly and if you can connect to the Markops Online database.
1.4.2 Checking your installation folders
Clicking on Tools/Installation Folder will launch a dialog box letting you know:
- In which folder your team file is located (by default, it is in the “C:\My Documents\My Markops Online Files” folder) - In which folder the Markops Online application is located (by default, it is in the “C\Program
Files\STRATX\Markops Online” folder)
1.4.3 Checking your Team and Course status on the Markops Online server At any time, you can use the Tools/Check Status on Web server function of the Markops Online to provide you with your latest Course and Team status, as shown in Figure 9.
This feature is particularly useful to:
- check how you are progressing with your decision rounds;
- check the date and time of your latest successful file transfer;
- retrieve your team password in case you can’t remember it;
- etc.
…………………………………………………………………...................
3
1.4.4 Modifying your Proxy Settings
If you connect to the Internet via a Proxy server, you can use the function Tools/Proxy Settings to modify your
Proxy settings.
By default, this form is pre-filled in with the settings used by Internet Explorer. Please contact your IT department should you need to modify your Proxy settings.
Figure 3– Modifying your Proxy Settings
…………………………………………………………………...................
4
2 MAKING DECISIONS WITH MARKOPS ONLINE
2.1 Overview
You and your team will have to make up to six rounds of decisions during a Markops Online course. For your decisions to be processed by the simulation model, data need to be exchanged over the Internet through a database server called the Markops Online server.
The data to be exchanged are your decisions and the simulation results. All data is located in a file called Team
File, named TEAMXX.XST, where XX stands for the team number which will be communicated to you by your
Markops Online instructor at the beginning of your course. There is only one file per team as all members of the same team share the same results and the same decisions. However, you will see that the team file can be duplicated on several computers if two or more team-members want to work in parallel.
For the first round of decisions, your team file contains information on the initial situation, i.e. market data, consumer segments, brands, channels, firms, as well as a copy of the decisions that were made by the previous management team. For subsequent rounds, the file contains the latest simulation data, obtained after the simulation run, and a set of decisions –called default decisions– that are just a copy of your decisions from the previous period. The objective of these default decisions is to prevent you from starting each time from scratch when making decisions, with zeros in all input screens. If you use these default decisions during the Markops
Online exercise, your results may suffer dramatically as they are far from being optimal.
Your Markops Online instructor is responsible opening each decision round, which will give you access to the latest simulation results.
Once your Instructor has opened a decision round, you and your team are in charge of your team file. You can read and print out your latest annual report and begin the process of analyzing the current situation. This analysis will lead to a series of decisions, which will be input into the decision screens provided. Once your decisions are finalised and error-free, you are in charge of saving your team file to the Markops Online server and requesting a run of the simulation. The simulation model will run, and produce a new set of results. You will be able to access your updated team file as soon as your Instructor opens the next decision round.
2.2 Authenticating
This step is required each time you connect to the Markops Online server, for example to download or to upload your team file. For security reasons, access to the Markops Online server is reserved to registered students. If you are not yet registered, please refer to section 1.1 of this manual.
The window shown in Figure 4 pops up each time you connect to the Markops Online server. Enter the username and password that you chose upon registration and select Next. The software connects to the Markops Online server and checks your identification. Please, note that you must be connected to the Internet to authenticate. The
Markops Online software does not initiate an Internet connection.
If you do not remember your username and password, click on Lookup in the pop-up window shown on Figure
4and you will be redirected to the Student Login section on the Markops Online web site; using your Markops
Online license number you will be able to retrieve your personal data.
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Figure 4 – Authenticating
If you are working on your own computer, you can tick the option Remember the password. Your password will be stored locally and will automatically reappear each time you authenticate. Please Note; this option should not be computers. used on shared computers
2.3 Self-assigning to your team
After authentication, the Team Selection window in Figure 5 pops up. Select your team and enter your team password. Your initial team name is TEAMXX, where XX stands for the team number which has been communicated to your team and you by your instructor at the beginning of the course, together with your team password.
Once you have entered this information, click on OK on the left hand side of the pop up window in Figure 5. selfYou only have to self-assign to your team the first time you download your team file.
Figure 5 – Self-assigning to your team
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The Markops Online software connects to the server, checks your identification (team name and password) and checks if your team is complete.
A complete team is a team for which:
• at least three members have successfully registered to the www.markopsonline.com web site
• at least three members have self-assigned to their team, using the Markops Online software. your complete,
If your team is complete you will be able to download your team file from the Markops Online server to your local disk drive and your team file will open automatically upon completion of the download. complete, If your team is not complete you will receive a message from the software. In that case, just wait until the other members of your team register on the www.markopsonline.com web site and self-assign to your team using the
Markops Online software. Once this is done, you will be able to download your team file.
Please note: Even if your team is complete, your Markops Online instructor must have started the Markops Online course before you can download your team file from the Markops Online server.
2.4 Downloading your Team File from the Markops Online server
At the beginning of each decision round, you must download your team file from the Markops Online server to access the latest simulation results. To download your team file, click on Open/From web server… in the File menu.
The download is completed upon authentication, and the team file opens automatically.
2.5 Organizing a Markops Online working session
Once you have downloaded your team file from the Markops Online server, you are able to read and print out your latest annual report and begin the process of analyzing the current situation. This analysis will lead to a series of decisions, which will be input into the decision screens provided. Details on the annual report and decision screens are provided in Chapters 4 and 5 of this manual.
If you have started a working session, and need to close it to resume it later, just click on Close in the File menu.
Your decisions will be saved automatically on your computer’s hard drive.
To open your team file from your local computer at a later stage, you must use the File/Open/Local Copy function and then select your team name and enter your team password in the screen shown in Figure 6.
Figure 6 – Opening your team file
As explained further in section 4.7, your team and you will be required to set a new name for your team during your first round of decisions,.You will then have to use this new name to open your team file during subsequent decision rounds. Your password, however, will remain the same throughout the Markops Online exercise. If you
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forget your team password, you can retrieve it by using the Tools/Check Status on web server function of the
Markops Online Team software, as explained in section 2.9.
2.6 Saving your team file on the Markops Online server
Within each Decision Round, you and your team may choose to organize several working sessions with the
Markops Online software. You can make a detailed analysis of your results on day 1, make R&D and brand portfolio decisions on day 2, make marketing mix decisions on day 3 and finalize everything on day 4. You may make decisions all together or choose to work remotely from different computers. The Markops Online software includes several features to help you with these different situations.
If you and your team decide to assign responsibilities (R&D, Production, Finances,…) to team members and to work remotely from different computers connected to the Internet, we strongly advise that you use the Markops Online server as a central location to save your team file.
To do this, use the File/Save function of the Markops Online software after you have taken your decisions. You will be required to authenticate, as explained in section 2.2, then the window shown in Figure 7 will pop up. Click on
"Upload" to store a copy of your team file on the remote server. You will receive a confirmation message upon completion. Then, the other members of your team will be able to download your team file from the Markops
Online server, using the procedure described in section 2.4, and input their own decisions into this file, which will contain the first set of decisions which you have already taken.
Figure 7 – Saving your team file on the Markops Online server
Please note that if you choose to work in this way, you should work in a sequential manner and not in parallel, otherwise you risk losing decisions which have already been taken. For example, we recommend the process described in Table 1.
WHO
Team Member 1
Team Member 2
Team Member 3
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WHEN
WHAT
Open team file from Markops Online server
Day 1
Work and input decisions
3. Save updated team file to Markops Online server
4. Open latest team file from Markops Online server
Day 2
5. Work and input decisions
6. Save updated team file to Markops Online server
7. Open latest team file from Markops Online server
Day 3
8. Work and input decisions
9. Save updated team file to Markops Online server
Table 1- Making decisions in a sequential manner
1.
2.
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If Team Members 2 and 3 do not coordinate and decide to download the file from the Markops Online server on
Day 2 and work on this file in parallel, then the file which will be saved on the server at the end of Day 2 will only contain the decisions taken by Team Member 1 and the ones taken by Team Member 2 OR Team Member 3, depending on which one has saved its file last. In any case, this file will NOT CONTAIN ALL OF YOUR
DECISIONS.
Therefore, make sure that you coordinate your teamwork to avoid losing decisions and wasting a precious time.
Even if you and your team decide to always work together, the Save Team File to Markops Online server function allows you to always keep a back-up of your team file.
2.7 Working in an environment with limited access to Internet
If you are working from a computer without a permanent Internet connection, you can save your team file locally on your computer when you close a Markops Online session and re-open it later to continue your work on Markops
Online. To do so, select Close in the File menu to finish the session and click on OK to save your file.
If you want to work from another computer afterwards, you can save your team file on a diskette, USB drive, zip drive or any other removable storage, and load it on another computer. Your team file is a file named TEAMXX.XST, where XX stands for your initial team number, which is by default located in the “C:\My Documents\My Markops
Online Files” folder of your computer.
Go to this folder using Windows Explorer, copy the TEAMXX.XST file on a removable storage, and then paste this file in the “My Markops Online Files” folder of the other computer which you would like to use. Obviously, you should have installed the Markops Online software on the other computer before performing this operation.
You can then open your team file from the other computer, using the File/Open/Local Copy function of Markops
Online.
2.8 Submitting your Decisions for Run
Your team decisions will be due on specific dates, as per the schedule specified by your Instructor. free. You can only submit your decisions for run when they are error free For instance, the software will not let you proceed if you exceed your budget. Make sure to check the screen Decision highlights at regular intervals as you do not want to find yourself with 15 or 20 errors 10 minutes before the closing deadline …
To submit your final and error-free decisions for run, you must first save your decisions to the Markops Online server, as explained in section 2.6, then select Submit for Run… in the File menu. You need to authenticate to perform this operation. Upon authentication, the dialog box of Figure 8 pops up.
Please make sure that the decisions you are about to submit for run are the latest ones before you click on submit “Yes.” Once you have submitted your decisions for run, you will not be able to make any further modifications not to your decisions until the beginning of the next decision round.
If the Submit for Run function in the File menu is grayed out, it means that your decisions are either not complete or not error-free. You will not be able to submit your decisions for run until you correct your errors.
Figure 8 – Submitting your decisions for run
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2.9 Checking your Course and Team status on the Markops
Online server
At any time, you can use the Tools/Check Status on Web server function of the Markops Online to provide you with your latest Course and Team status, as shown in Figure 9.
This feature is particularly useful to:
- check how you are progressing with your decision rounds;
- check the date and time of your latest successful file transfer;
- retrieve your team password in case you can’t remember it;
- etc.
Figure 9 – Checking Course and Team status on the Markops Online server
2.10 Starting your next Decision Round and Accessing your Team
Rankings
As soon as your instructor opens a new decision round, you will be able to download your updated team file by following the instructions detailed in section 2.4.
You will also be able to compare your results to those of the other teams in your Markops Online course, by using the Rankings menu. Please note that access to this menu is controlled by your instructor. You will only be able to access your course rankings if your professor decides to grant you access.
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ARKOPS
3 OVERVIEW OF THE MARKOPS ONLINE WORLD
3.1 Introduction
The Markops Online business game simulates a fictitious world where four companies are in competition to market a portfolio of brands to several groups of customers. The simulated market is complex enough to illustrate different marketing situations, i.e. various segments of customers (based on family income, marital status, occupation, …), several customer value combinations (high-end brands versus low-end ones), varying price sensitivities, different communication and promotional tools, traditional distribution channels (from mass merchandisers to specialty chain stores) as well as new e-enabled channels (such as e-grocers and eboutiques), etc.
You and your team will manage Chewy, one of these companies, during six periods of six months, i.e. three years in total. The simulation model will run the decisions and results of the other companies automatically, challenging you with innovative decisions, but also responding to your moves.
The other human teams involved your Markops Online course will manage the same company Chewy, but in other simulated worlds, totally separate from your own world. Consequently, the decisions of the other teams will have no impact on your own results. Your ultimate objective is to maximize shareholder value as reflected by the Share Price Index of Chewy. However, there are two ways to measure your results:
•
•
Absolute Measure. Your share price index at the end of the exercise will be compared to the ones of your direct cyber competitors. You may, for instance, have increased the market value of your company by 300% while your best competitor will only have achieved a result of 250%.
Relative Measure. Your final share price index will also be compared to the ones achieved by the other human teams, who have run the same exercise with the exact same starting situation and the exact same competitors. Your absolute performance of 300% may be reevaluated as fairly poor if another team achieved a result of 500%!
As far as this Markops Online exercise is concerned, only the relative measure will be taken into account. The ultimate winner will be the team which has achieved the highest Share Price Index for its own Chewy company.
3.2 Your Role
You and the other members of your team have just been recruited by Chewy, a large corporation, to manage one of its divisions. Coming from a different industry, you have no experience of the Markops Online world. In the upcoming years, you will compete with several other firms to market fast moving consumer goods (FMCG) products to consumers. During this exercise, you will be responsible for formulating and implementing the marketing strategy of your division for a simulated period of 3 years of business activity (i.e. six decision rounds). You and your team members will have to:
• target selected segments and position your products in the market place;
• develop new products from formulas discovered by your R&D department;
• prepare the launch of new products; improve or maintain existing ones;
• interface with the Production department to specify capacity and production planning;
• make marketing mix decisions, such as pricing and advertising budget;
• decide on how to distribute your brands and allocate resources across channels;
• order market studies that provide up-to-date information for decision making.
3.3 Overview of the Markops Online Industry
The Markops Online world is a fictitious industrialized country with approximately 80 million inhabitants whose monetary unit is the Markops Online Dollar ($). In this country inflation is practically zero and is therefore ignored. GNP growth is fairly stable, and no major political, social or economic events are
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anticipated in the near future. The Markops Online world does not intend to represent any particular country, market or industrial sector. However, it roughly behaves like most markets, and the general management and marketing knowledge that you have acquired through business experience or formal education applies to this new world.
In the Markops Online world, there are a handful of companies which manufacture and market FMCG products. Besides Chewy – your own firm – your competitors are called Whippit, Savor, and Tasty. Chewy,
Whippit, Savor and Tasty are four traditional brick-and-mortar firms that operate according to a traditional business model. They mainly distribute their products through established distribution channels, although a few of them have initiated a slow transition into the new Internet world.
These firms operate in a fast moving consumer goods environment. They market edible consumer products called Yumites. These products have existed for several years and the market has grown quite consistently since the introduction of the first Yumite brand. It is now a well-established market, with several strong brands at different price points covering a wide range of needs. Analysts believe that the Yumite market will continue to grow over the next five years.
Initially each firm starts with two or three products, with different product specifications, target customer groups, brand awareness levels, market share, distribution coverage, profitability, R&D expertise, etc.
Consequently, the marketing strategy of each firm should be adapted to its particular situation within the industry. Nevertheless, no firm has a relative advantage over the others and initially many characteristics are common to all firms. Each firm in the Markops Online world will have the opportunity to discover new formulas and introduce new products or upgrade existing ones. Similarly, all firms may access any distribution channel.
3.4
Product Profiles
At the beginning of the simulation, the rival firms market two or three brands each. These products are widely accepted by the various segments of consumers, and the market as a whole is expected to grow in the coming years. The Yumite products marketed by the various firms in this market are differentiated by tangible physical attributes, which are rated on a scale of 0 (poor) – 100 (excellent). The most important attributes are the following:
• Performance – Ability of the product to deliver the benefit intended. This measure can include such components as appearance, texture, sensation, etc.
• Nutrition – Degree to which the product is “good for you” or has high quality ingredients. A high rating is an indicator of no preservatives, little artificial color, no added sugar, etc.;
• Packaging – Characteristics of the product packaging. Several benefits are included here, such as attractiveness, ease of use, convenience, appropriate serving size, etc.;
• Flavor – Quality of the product taste, in terms of uniqueness and pleasure of the taste experience with the product, and of ability to support the performance claim. For instance, high quality flavors can express concepts such as smooth, natural, fresh, etc.
Figure 10 shows an example of ratings for existing products along these four dimensions. As with all the other figures in this manual, Figure 10 was obtained during a past run of the Markops Online simulation.
Please note, your own market situation may be very different.
Figure 10 – Physical attributes of marketed brands
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As new formulations come onto the market, improvements will take place in certain products’ attributes. Bear in mind that an improvement in one dimension may result in deterioration in another dimension. For instance, a higher performing product may be less nutritional as the new formula includes artificial coloring which enhances appearance.
Depending on the particular combination of attributes, each product will have a certain initial unit production cost, i.e. the cost charged by your production department to manufacture the product. As cumulative production experience increases, this cost will decline in accordance with a specific schedule corresponding to four production batches, each one of which has a cost 15% lower than the previous one:
Millions of Units Produced
(cumulative)
< 10
Production Cost Applied
C : Initial Production Cost
10 to 20
C x 0.85
20 to 40
C x 0.85 x 0.85
> 40
C x 0.85 x 0.85 x 0.85
Figure 11 – Reduction of production cost as a function of cumulative production
3.5
Naming Conventions
All brands marketed in a given period will be listed in the Newsletter, in a table similar to Figure 10. In the
Markops Online world, the first letter of a brand name is the same as that of the name of the firm. When introducing a new brand, you will have to choose a new name provided by the trademark department.
However, the selected name has no influence on the market response to the brand.
3.6 Consumers
The consumers who purchase Yumite products are of varying ages, occupations, and family status. They are all adults, over 18 years of age, who purchase the products for personal use or for the family. Market studies show that these consumers can be divided into five major groups, or segments, having similar needs and purchasing behavior.
1. High earners – The members of this group are characterized by their high incomes. They are men or women over 25 years of age, either single or married without children, and studies show that they usually buy expensive products, which they can afford, and that their purchases can be motivated by social status. They are heavy users and can sometimes be price insensitive to the point of disregarding cheap brands.
2. Affluent Families – People in this segment are aged 25 – 45, and are either married or single with children. Their high income level leads them to be frequent buyers and users of Yumites. They can afford expensive products and often view price as an indication of quality.
3. Medium Income Families – These consumers have less disposable income than the Affluent Families, and are thus more price sensitive. This segment also includes some sub-groups who do not fit with the other segments. Although this segment is the largest in value and is composed of several subgroups, most customers have similar needs. They are looking for relatively inexpensive products with average physical attributes.
4. Low Income Families – Individuals in this segment are aged 25 – 45, and are either married or single with children. Their low income levels, however, causes their budgets to be strained, and leads them to be less frequent buyers and users of Yumites, and to be very price sensitive.
5. Singles – As the name of this segment indicates, Singles live alone. They are generally between 18 and 35 years of age and can be students or employed. All in all, while being relatively heavy users, they demand average levels of physical attributes from their Yumite products and tend to be pricesensitive.
Each segment has specific needs in terms of physical attributes and price. The semantic scales market studies reflect the relative importance of the different physical attributes and of price for each consumer segment, as well as consumer perceptions of each of the marketed brands as regards their physical attributes and price.
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Awareness levels and purchase intentions vary significantly for existing products from one group to the other.
In addition, market forecast studies show that the size and growth rates of the five segments are quite different. This is explained in part by the development stage of each segment, by the varying product offerings, and by the intensity of marketing efforts targeted at each segment.
3.7 Distribution Channels
3.7.1 Traditional Distribution Channels – Retailers
Yumite consumers tend to shop in the following three distribution channels.
• Mass Merchandisers (e.g.: Carrefour, Wal-Mart, Tesco, …) – These “super stores” typically sell a wide
Merchandisers
variety of goods, including food items, housewares, and personal care products. They strive to operate on a low-price, high-volume basis and to minimize overheads. As a consequence, the level of service offered is lower than that of the two other channels. While mass merchandisers carry many different product categories, the depth of each product line is usually restricted to a few units. They often distribute the cheaper, lower-quality products. There are 15 chains of such stores, for a total of
12,500 outlets.
• Supermarkets (e.g.: 7/11, Franprix,…) – These stores are usually smaller and also belong to organized chains. They are geographically close to their customers (in shopping centers or downtown areas) and can provide a higher level of customer service. As they do not distribute as many different product categories, Yumites account for a large proportion of their sales. These stores usually carry a broad product line for each category, including the most expensive and/or high-performance products. Twenty-five chains exist in this category, representing 2,000 stores.
• Specialty chain stores (e.g.: Fauchon, Hédiard, Holland & Barrett, …) – These stores are characterized by the wide product assortment they offer. They usually have a significant amount of space displaying
Yumites, often with a specific counter or display dedicated to each major manufacturer. They provide extensive customer service. Specialty chain stores are often organized so that they have a degree of power in negotiating margins with manufacturers. Eight such chains with a total of 6,000 stores are identified in the Markops Online world.
3.7.2 Internet Distribution Channels – E–Tailers
In addition to the traditional distribution channels described above, you also need to consider the marketing opportunities offered by the Internet.
• E-Grocers’ Web Sites – These sites offer Yumites lines along with food and other merchandise sold in the site owners’ establishments. The Markops Online world starts with approximately 10 of these merchandisers in period 0.
• E-Boutique Sites – These sites are specialized in Yumites and dedicated to highlighting the range of
Yumites available, focusing on the more expensive, upscale brands. Fifteen such sites exist in Period
0.
All these various portals and sites have different characteristics in terms of image, awareness levels, financial strength, range of products offered, price ranges, the selling mechanisms applied (up-selling, cross-selling, automated replenishment, ability to purchase online), the customer base (proportion of each segment likely to visit the site), etc.
3.8 Margins and Discounts
When deciding on which channels are the most appropriate for the distribution of your brands, you will have to take into account margins and discounts. The margin is the percentage of the price paid by the consumer that is retained by the store. Differences between margins obtained by the stores in each of the channels are mainly due to differences in the level of service and volume sold. The discount is the percentage of reduction that a store will offer to its clients. Although discounts vary over time, most stores or sites comply to the general guidelines established by the chains.
Figure 12 summarizes margins and discounts in the Markops Online world, and gives an example for a $10 product. As explained later, you have the ability to modify the margin by plus or minus 10% if you feel this would be a useful marketing tool.
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Mass Merchandisers
& e-Grocers
Average Margin
Average Discount
Example
Recommended Retail Price
Price Paid by Consumers
Margin
Firm Revenue in $
In % of Rec. Retail Price
Supermarkets
35 %
10 %
40 %
5%
$ 10.00
$ 9.00
$ 3.15
$ 5.85
58.5 %
Specialty chain stores & eboutiques
50 %
None
$ 10.00
$ 9.50
$ 3.80
$ 5.70
57.0 %
$ 10.00
$ 10.00
$ 5.00
$ 5.00
50.0 %
Figure 12 – Summary of distribution channels’ margins and discounts
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ANAGING
4 MANAGING YOUR FIRM
Your team is responsible for the design and implementation of the marketing strategy of your firm. You will have to decide the overall orientation of the company regarding:
• the product portfolio strategy – which brands the company is going to develop and market;
• the segmentation and positioning strategy – which market segments will be targeted and how products will be positioned;
• the marketing mix strategy – the day-to-day operational marketing decisions such as pricing, production, communication and distribution.
You will manage your area as a profit center, and your performance will be measured by the following indicators: net contribution generated, brand market shares, your ability to grow the firm’s revenues, quality of R&D projects successfully developed, etc. Finally, the best measure of your company's success will be its
Stock Price Index, a measure that takes all of the above indicators into account.
This chapter describes the decisions you will have to make each period. Before making dramatic changes, you should try to get a feel for the behavior of the market. Do not jump hastily to conclusions and bear in mind that obvious solutions may be based upon an incomplete analysis. To reach more robust decisions, use the information from market studies to analyze your situation and past competitive behavior.
4.1 Formula Discovery
A key aspect of running your firm will be the launch of new brands or the improvement of existing ones, using new formulas discovered by your R&D department. You are not able to influence the attributes of new or improved products, and you do not have to make any specific decisions in order to discover new formulas. products decisions
Your R&D department does this without your intervention. As R&D discovers new formulas at a rate of one to three per period, these will be submitted for your consideration, in a chart such as the one of Figure 13.
In order to identify and keep track of the various formulas discovered over time, they are named with codes such as “C02B-Ini”, “C06E-Impr” or “C12H-Cost”, in accordance with the following pattern:
C
•
•
B
“C” as
Chewy
•
•
02
Project
Rank
Active
Ingredient
–
Ini
Type of project “C” indicates the name of the firm: “Chewy”.
C
“02 indicates the chronological rank of the formula. All formulas generated by Chewy’s R&D
02”
02 department have a sequential number from 01 on.
“B” is the code of the active ingredient of this formula, such as “Vitamin A”, “Potassium salt”, etc.
B
Several formulas can be based on the same active ingredient, with varying features or based costs, as explained below.
“Ini means that this is the initial formula for active ingredient “B”. A formula could also be designated
Ini”
Ini
“Impr meaning Improved. Such formulas have the same active ingredient designation as a previous
Impr”,
Impr one, but represent an improvement in one or more of the physical attributes. Finally, a formula could be designated “Cost for Cost reduction. Such a formula is identical to the previously launched one,
Cost”,
Cost but the production unit cost has been reduced thanks to production rationalization.
For example, Chewy may find the following series of formulas coming out of R&D:
C01A-Ini
: Initial formulation of active ingredient “A” ;
C02B-Ini
: Initial formulation of active ingredient “B” ;
C03C-Ini
: Initial formulation of active ingredient “C” ;
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C04B-Impr : Improvement of the original “B” formula, with upgraded physical attributes;
C05A-Cost : Cost reduction of “A” formula, with physical attributes unchanged;
C06B-Cost : Cost reduction of the “B” formula, which had already been improved;
Figure 13 shows the list of formulas discovered during the sample run. All these formulas are available for development. Figure 13 – R&D Report : Discovered Formulas
4.2 Formula Development and Brand Portfolio
As successive formulas are discovered by your R&D department, you have the option to use them if you feel they would make a useful addition to your portfolio. If you choose to use the formula, it must be developed into a product. The development phase lasts one period. In other words, if you request the development of a proposed formula, it will not be on the market before the following period. However, the decision to use this formula to launch a new brand or upgrade an existing one can be made as soon as the development is requested. Figure 14 shows the formulas that were developed during past periods of the sample run. As you can see in the second column, some of these formulas are already being used as the basis of a marketed brand; for instance, CANDY based on C02B-Ini or CAKE based on C03A-Cost. The other ones can be used to upgrade an existing brand or to launch a new one; for instance: C04C-Ini.
Figure 14 – R&D Report: Developed formulas
The Main screen to enter Brand Portfolio decisions is shown in Figure 15. The first decision is whether or not you choose to develop any formula in this period. If so, a drop-down screen will allow you to select amongst the formulas which have been discovered but not yet developed. Due to resource constraints in the R&D department, you may only develop one formula per period, even if more than one has been discovered.
You may then decide to launch a new brand or to upgrade an existing one with one of the formulas already developed, or with the formula you just decided to develop. If you click on Introduce, a second screen will
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allow you to make decisions concerning your new brand, to be launched in the following period. This screen is shown in Figure 16.
The trademark department of your company will suggest a name for your new brand. In addition, you must establish an initial plant capacity level for the brand. Capacity refers to the maximum amount of the product which can theoretically be produced by your factory during one period. This is related to the size of the factory, the equipment level, speed of production lines, etc. You must decide on a level of initial capacity for any new brand, which will be in place one period later, upon launch. In the same way, any requested capacity increase for existing brands will take one period to become effective. Once built, capacity cannot be destroyed. Figure 15 – Brand portfolio decision screen
If instead of developing a new brand, you choose to upgrade an existing one, do so by first selecting the brand in the list of Figure 15, for instance CANDY, and then by clicking on the Upgrade button. The same screen as the one in Figure 16 pops up to let you select the correct formula in the drop-down menu.
Whenever you make these decisions, the screen of Figure 15 lists the brand portfolio elements in the current period, and the next one, based on the changes you have just decided.
Figure 16 – Brand launch or upgrade decision screen
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Keep an eye on inventory level or stock build up. If too much inventory has built up, it is obvious that production levels should be decreased as a consequence. If a product is modified by means of an improved or cost-reduced formula, all inventory of the old formula is disposed of as it is considered obsolete. This implies
1) a disposal loss, calculated at 125% of current base cost; and 2) that any improved product begins with zero inventories, although the pre-existing capacity levels remain unchanged.
Timing is a critical issue in formula development and brand portfolio decisions. It is important to note that both decisions take one period to take place, but that they can be done in parallel. The table below shows two concrete examples.
COST REDUCTION OF CAKE
Period
0
•
•
Period
1
•
•
•
•
Period
2
•
Brand CAKE is marketed, based on formula C01A-Ini.
Formula C03A-Cost is discovered by
R&D.
Decision to develop C03A-Cost is made. Development takes place and is completed during Period 1.
Decision to upgrade CAKE based on
C03A-Cost is made.
The upgrade is prepared during Period
1 (change in manufacturing processes, marketing materials…) but it is not effective before Period 2.
All inventories of brand CAKE existing at the end of Period 1 are disposed of because they are based on the old formula C01A-Ini.
Brand CAKE is now based on formula
C03A-Cost, with a reduced cost.
INTRODUCTION OF COCOA
Period
2
•
Formula C04C-Ini is discovered by
R&D.
Period
3
•
Decision to develop C04C-Ini is made.
Development takes place and is completed during Period 3.
Decision to introduce COCOA based on
C04C-Ini is made.
Decision to build a new factory of 8,000 units for COCOA is made.
The introduction is prepared during
Period 3 (construction of the new plant, marketing materials…) but it is not effective before Period 4.
Brand COCOAL is launched based on formula C04C-Ini.
•
•
•
•
Period
4
4.3 Brand Management
Your team must make a number of decisions each period concerning the management of the brands in the portfolio. The Brand Management screen shown in Figure 17 contains the fields needed to enter these decisions. Management time. You need to indicate, for each brand, the management time you wish to devote to it. time Management time decisions are given in number of person-months. For instance, allocating 180 personmonths to brand CAKE is equivalent to having a team of 30 managers working full-time for the 6-month period. Allocating management time to a brand or a channel is necessary to implement large scale projects such as introducing or improving a brand, but also for the day-to-day management activities. Increasing the size of your task force will have a positive impact on how your other resources are used: advertising budgets, trade marketing budget, etc.
Price.
Price Based on your analysis of the market conditions and competitive offerings, you can set the retail price of your brand for the coming year. This is the retail price paid by consumers, so remember to take into account the margins paid to distributors, as explained in Figure 12.
Capacity.
Capacity In this area you are reminded of your capacity level for each brand in the current period and given the option to build additional capacity. Remember that building new capacity will take one period, so you have to plan capacity increases in advance.
Production.
Production In this field you indicate how many units of the product you actually want the plant to manufacture. This number can be any level up to the current capacity. It may be that capacity requested last
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period turns out to be not needed, as the market has become more sluggish. In such a case, you may need less production than capacity.
Your factory will adjust production levels to allow you a margin of plus or minus 20%, depending on your actual level of sales. For example, if you ordered 10,000 units of production, but only were able to sell 7,000, the factory will scale down production to 8,000 (-20%), leaving you with inventory of only 1,000 units. On the other hand, if there is a demand of 14,000 units for your brand, production will stretch to 12,000 (+20%), resulting in lost sales of only 2,000.
Figure 17 – Brand management decision screen
Advertising.
Advertising You must make two advertising decisions each period. Firstly, you should determine the advertising media budget allocated to each brand. This budget will be used to purchase media space and time. Your advertising agency will select automatically the most appropriate media that targets the most relevant segments for the brand.
Secondly, you must specify the budget allocated to advertising creation. This finances the advertising research, creative work, media selection, and other activities conducted by advertising agencies which improve the quality of your message. In past years, companies have devoted on average 7% of their total advertising expenditures to advertising creation. Advertising creation will usually make your advertising more effective, and is especially important when you introduce a new brand or when you look to reposition an existing one. In these last two instances, higher percentages are recommended, in the range of 15 to 20%.
Positioning.
Positioning An essential part of your marketing effort will involve delivering the appropriate messages to the various segments, in line with what they expect, and considering what your brand has to offer. Using the
Semantic scales study and the relevant Brand maps (see Market Studies section for more information on
Semantic Scales), you can decide on the content of your advertising, along two of five dimensions:
Performance, Nutrition, Packaging, Flavor or Price.
Making positioning decisions is fairly easy. You should first choose one or two dimensions amongst the ones that are most relevant to the targeted segments. The Semantic scales study will give you the relative importance of each dimension for a specific segment. As you can see in Figure 17, team Sample decided to use Flavor and Performance for brand CAKE. Then, you must determine what is the ideal position where you would like to be positioned on the corresponding Brand Map. An example of such a map is given in Figure 29.
As you can see, team Sample decided to position brand CAKE at a position (6, 6.7), close to brand WARM, probably because this brand is successful with CAKE target segments.
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There are limits to how far you can position or reposition a brand. These limits depend on the intrinsic attributes of your brand, on its price and on the advertising media and creative budgets you allocate to it.
Figure 18 – Channel management decision screen
4.4 Channel Management
Decisions are also required, on how you will manage your relationships with traditional as well as online channels. These are captured on the screen in Figure 18. Here you can indicate the management time (in person-months) to be dedicated to each channel, as well as several aspects of trade marketing.
Marketing.
Trade Marketing This includes the referencing budgets plus additional features such as in-store reps, showwindow and in-store location display materials, product sampling displays, etc. These features are used to provide to outlets the means to enhance sales. Thus, you should obtain a better push from distributors if you increase the trade marketing budgets. Note that cutting this budget to 0 means: “do not distribute our brands in this channel”.
Promotion. This includes all the traditional promotional tools such as free gifts, 2 for 1 offers, samples,
Promotion
coupons, etc. Your staff will automatically select the tools that are most appropriate for the target segments.
Increasing promotion will push consumers to try your brands. However, beware of increasing promotion too much as this may have a negative impact on the brands’ image, especially for high-end segments.
Margins.
Margins Each channel type is typically given a certain margin of the retail price, set at 50% for Specialty Chain
Stores, 40% for Supermarkets, and 35% for Mass Merchandisers (see Figure 12). You have the option to provide more or less than these guidelines, within a range of plus or minus 10%. Thus you can propose a 48% margin to Supermarkets if you feel they will make an extra effort as a result, which will translate into higher sales for you.
Priority.
Brand Priority You must decide, for each channel, the proportion of effort that will be dedicated to each brand. 4.5 Ordering Market Studies
One of your decisions will be to order market studies. All studies are ordered at the beginning of a period and are conducted by a specialized research firm during that period. The results are delivered with your annual report at the end of the period.
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All studies you purchase will be made available on paper and/or on screen. The information provided is relevant to the market situation during the analyzed period, with the exception of the market-forecast study.
The list of available studies is given in Figure 19. All studies are detailed further later in this document. To order a study, simply check the box “Purchase next period”, next to the study title. Remember that studies ordered in Period N will be available in your Period N+1 report.
Figure 19 – Ordering market research studies
4.6 Budget
Each period, your division will be given a total budget to spend. A minimum applies, so that even if your results wer not good during the last period, you will still be able to function with a reasonable level of activity.
Similarly, there is a maximum, as available resources are allocated to other divisions in the case of a very successful period. Those minimum and maximum levels are indicated in the Newsletter.
The budget screen of Figure 20 shows a summary of what has been spent via decisions made in all the previous screens. It also compares your total costs to the available budget and indicates the positive or negative deviation.
Note that you will not be authorized to submit your decisions to the Instructor if you exceed your budget.
Additional screens are available which provide budget details by brand and by channel.
Figure 20 – Comparing expenses with available budget
4.7 Setting your Team Name
There is one decision which will be available to you only once, during your first round of decisions: setting a new name for your team.
You can do so very easily by clicking on Decisions/Set team name in the Markops Online menu, and then entering the name you would like to use in the cell shown on Figure 21. Your team name should not exceed
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twelve (12) characters. Make sure you do not forget to change your name during the first decision round if you do not want to find yourself with a name such as TEAM11 for the rest of your Markops Online course!
Figure 21 – Setting your team name
4.8 Decision Highlights
Upon request, the Markops Online software will make a quick analysis of your decisions and check a number of points. The report of this analysis can be obtained by selecting Decision highlights in the Decisions menu.
It includes three sections.
• Errors These are the very important points which you cannot ignore; otherwise you will not be able to
Errors.
submit your decisions for a run of the simulation. Typical errors include: decisions not yet made; being over-budget; marketing a brand with no manufacturing capacity; forgetting to set a new team name; etc.
• Warnings These are the points that may have been done on purpose but could also be potential
Warnings.
errors. Typical warnings include; dramatic price increase or decrease; developing a formula but not using it to introduce or upgrade a brand; etc.
• Highlights These are the most important points of your decisions. They are listed to so that you can
Highlights.
check you meant to make the corresponding decisions were made on purpose. Typical highlights include: introducing a new brand; upgrading an existing one; developing a formula; etc.
Please ensure that you check the screen Decision highlights at regular intervals as you do not want to find yourself with 15 or 20 errors 10 minutes before the closing deadline …
4.9 Past Decisions
At any time during the course of the Markops Online exercise, you will be able to browse through your past decisions by selecting Past decisions in your Decisions menu.
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5 YOUR ANNUAL REPORT
You will have access to your annual report at the beginning of each decision round. The annual report provides you with the results of the period that has just ended. For instance, you will be making decisions for period 4 based on the annual report of period 3. The annual report is composed of three separate sections: the Company Report, the Newsletter and the Market Studies. Screenshots of the most important tables and charts are included in this chapter. For more tables and charts, please refer to the annual report that you will receive at the beginning of the simulation exercise.
5.1 Newsletter
The Newsletter provides general and financial data on the industry, on the competing firms and on marketed brands. The Newsletter consists of the following charts.
Company Key Performance Indicators – The screen shown in Figure 22 provides comparative charts with various financial and marketing performance indicators such as: market shares, retail sales in the various types of channels, current and cumulative contributions, stock price indices and return on investment ratios.
All numbers are given in absolute values or as percentages.
Figure 22 – Newsletter : Company Key Performance Indicators
The financial and marketing indicators are well-known and do not need additional explanation. The shareholder value indicators are described below in more details.
• Market Capitalization This is the value of the company, calculated by multiplying the stock price by
Capitalization.
the number of outstanding shares. For simplification reasons, you can assume that there will be no change in the capital structure of the companies, e.g. no issuance of additional stock. Thus, the variation in the Market capitalization is a good representation of how companies are valued by investors. Although it is not always easy to understand the variations of stock price, the main drivers of market capitalization are revenues and profits. The best way to increase your stock price is to grow revenues and profits with no fluctuations.
• Stock Price Index (SPI). This is a simple measure used to monitor the variation of your stock price and to compare it with those of your competitors.
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Market Capitalization at period P
Market Capitalization at period 0
All competitors have a SPI of 1000 in Period 0. Then, if the SPI increases, it means that the company created shareholder value. If the SPI decreases some value was destroyed.
• Current Return On Investment (ROI). The current ROI is defined in Markops Online as
Net Contribution
Net Contribution
=
Current ROI =
Marketing Expenditures
CBM – CAM where CBM is the Contribution Before Marketing and CAM is the Contribution After Marketing.
• Cumulative Return On Investment (ROI). The cumulative ROI is derived from the current ROI. It is defined as:
Cumulative Net Contribution
Cumulative ROI =
Cumulative Marketing Expenditures
Characteristics
Characteristics of Marketed Brands – This section details the physical characteristics, price, and unit cost of all marketed products, and it indicates which brands have been recently improved upon or introduced.
Brand Sales and Market Shares – Here you will find market shares, in units and in dollar value, the volume sold and the retail sales of all brands. Volumes and retail sales are given in absolute values and in percentage change from the previous period.
Cost of Market Research Studies – This chart gives the list of available market research studies and the corresponding costs. Note that you must order studies each period in order to get up-to-date information.
Financial Data – The evolution of economic variables are highlighted in this part of the Newsletter. Various costs relative to production, management time, budget and General & Administrative overheads are also provided. SPI at period P = 1000 x
5.2 Company Report
The Company Report provides confidential information regarding the results of your company. This information will allow you to assess the impact of decisions made and review the level of success or lack of success of the strategies put into place. The company report includes the following charts:
Firm Results – This section describes your firm’s financial performance, in the form of a simplified P & L
Statement. All numbers are given in absolute values for the current period and the previous one, and in percentage change from the previous one as well. The screen is depicted in Figure 23 and is detailed below.
• Retail sales : total sales paid by consumers.
• Revenues : retail sales minus distributors' margins.
• Cost of goods sold : number of units sold x Average unit cost.
• Inventory holding cost : units in inventory x unit transfer cost x inventory holding cost in %, as given in the Newsletter.
• Contribution before marketing (CBM) : Revenues – Cost of goods sold – Inventory cost
• Contribution after marketing (CAM) : CBM – (Advertising + Promotion + Trade marketing).
• Production fixed costs : Production capacity x Fixed cost in $/Unit as given in the Newsletter.
• Management time costs : Sum of managers’ operating, hiring or firing costs. Managers costs are indicated in the Newsletter.
• Exceptional costs or profits : Include exceptional items such as brand withdrawal costs. These exceptional items are fully explained with messages from the simulation when they occur.
• Brand contribution : CAM – Other costs.
• Corporate costs : Here are included R&D costs (discoveries and developments), Market studies, and
General and Administrative costs. G&A costs are overhead costs calculated as a percentage of revenues plus a fixed amount per brand and per channel used, as indicated in the Newsletter.
• Next period budget : Calculated as 40% of revenues, with a minimum and a maximum, as explained in the Newsletter.
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Figure 23 – Company Report : Firm Results
Brand Results. This chart shows essentially the same information as the Firm Results chart, for the current period only, but broken down for each brand in the portfolio. Additional information is provided on units sold, average unit retail and selling price, and total number of units produced.
Market Shares & Distribution Coverage. This screen provides information on the way in which each of your brands is represented in the various distribution channels. It indicates each brand’s total market share in units and in value, as well as the percentage of each type of distributor which carries your brand.
Discovered Formulas. This chart, depicted in Figure 13, is a listing of the formulas that have been discovered by your R&D department but have not yet been developed for use as brands. For each one, you can see its physical characteristics, initial base cost as well as the minimal base cost which can be achieved when 40 million units will have been produced. Also given is the cost to develop the formula, if you so choose.
Keep in mind that R&D will continue discovering several formulas per period. Based on your analysis of the data in this chart, you need to decide which, if any, you wish to develop in the current period.
Developed Formulas. This is simply a summary of those formulas you have already developed for use as brands in your portfolio. See an example of this chart in Figure 14.
Messages. Finally, this screen contains messages from the simulation regarding events which have taken place, such as new formula discoveries or developments, and reminders of essential steps which need to be taken. Figure 24 – Company Report : Messages from the simulation
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5.3 Market Studies
You may purchase up to 7 studies each period. The list below provides a brief summary of the information provided by each study. Check your annual report for a full listing of the studies. In addition, the software includes a few additional charts that are not included in the printed report so as to limit its size.
Consumer Panel – This study, depicted in Figure 25 provides the total unit sales for each segment; the relative size of each segment; and the market shares, based on units sold, for each brand in each segment.
Figure 25 – Consumer panel : Market shares
Consumer Survey – The consumer survey provides information on:
• the level of brand awareness: percentage of potential consumers in each segment who spontaneously recall a given brand name;
• shopping habits: percentage of potential consumers in each segment who prefer to shop and buy in a given distribution channel; see an example in Figure 26;
• brand purchase intentions: percentage of potential consumers in each segment who intended to buy a given brand.
Distribution panel – The distribution panel gives information on the total sales, in each distribution channel; the relative size of each channel; and the market shares, based on units sold, for each brand in each channel.
A second chart, depicted in Figure 27 provides the distribution coverage for each brand in each channel, i.e. the percentage of stores or web sites carrying a given brand. This information is given separately for both traditional retailers and Internet-based channels (e-Tailers).
Figure 26 – Consumer Survey : Shopping habits
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Figure 27 – Distribution Panel : Distribution coverage
Semantic scales – Semantic scales describe how consumers perceive the marketed brands. Respondents are asked to rate each brand along each physical characteristic on a scale from 1 to 7 according to the way they perceive the brand. For instance, a brand rated 2.3 on the FLAVOR scale is perceived as having less flavor than a brand rating 5.5 on the same scale. Similarly, consumers are asked to evaluate the importance of each characteristic, in other words, the weight each characteristic takes in the buying decision. A sample chart of the Semantic Scale study is depicted in Figure 28.
Additional charts and graphs are available online. For instance, you can obtain a graph, or Brand Map, showing the relative position of each brand on a graph whose axes can be set for any of the physical characteristics. This map, depicted in Figure 29 will allow you to see the differences in how brands are perceived and help you determine what needs to be done to correct their positioning (i.e. more or better communication, or improving the product; or both). Two brands close to one another on the map are perceived as being similar. Inversely, two brands located in different quadrants are perceived as being significantly different; for instance, one may be perceived as less nutritional or as having more flavor.
These maps will also allow you to determine the content of your advertising, as mentioned previously. If your brand is perceived as 3.2 in Flavor, and you feel it could be perceived higher, you can enter a ‘4’ on that dimension in the Brand Management screen of Figure 17. This will direct your ad agency to create messages that emphasize the appropriate level of Flavor.
Figure 28 – Semantic Scales : Brand Perceptions
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Figure 29 – Semantic Scales : Brand Map
Competitive Intelligence – This study estimates total advertising expenditures for each competitive brand by segment. It also provides the average advertising spending by brand and by firm, in total and for each segment. Further charts give estimates on how much was spent for each brand in Trade Marketing and
Promotion, for each traditional and online channel.
A sample chart is shown in Figure 30. This data will be essential in explaining past performance or to determining suitable spending levels for the current period.
Figure 30 – Competitive Intelligence : Advertising budgets
Benchmarking – In this section you will find a comparison of key figures and financial results for the various companies in the Markops Online world. The available data is fairly comprehensive and is presented in the same format as the Firm Results chart, given in Figure 23.
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Market Forecast – This research study estimates the expected size in units and the growth rate of each segment for the next three periods. Similarly, estimates are given for the expected growth of the channel sizes over the next three periods, as shown in Figure 31. These estimates are based on the current market situation and assume that no substantial changes such as brand introductions, or significant price increases or decreases will take place in the future. Consequently, depending on what actions are actually taken by your firm and your competitors, the resulting market size will either be higher or lower.
Figure 31 – Market Forecast : Channel sizes and growth rates
Finally, this study also provides the new brands expected to be launched by your competitors in the upcoming periods. See Figure 32 for an example.
Figure 32 – Market Forecast : Expected new brand launches by competitors
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6 FINAL RECOMMENDATIONS
It is important that you carefully read and understand the information in this manual before the beginning of the simulation exercise. From previous use of Markops Online in a classroom environment, we have found that you will benefit by paying particular attention to the following advice.
• Emphasis on strategic issues. Concentrate your efforts on strategic issues and long-term planning.
The emphasis of the simulation is not on short-term activities, such as promotions or discounts.
• Importance of analysis. Before making decisions, be sure that you understand the behavior of the market. Do not jump to the first explanation, or conclusion, that you may have reached when faced with a problem: it may be incomplete. The detailed analysis of Market Research Studies, of your own situation and of past competitive behavior should help you reach more robust decisions.
• Group time allocation. Make sure that you allocate your discussion time sensibly between problem areas. You will be under pressure to submit your decisions by the given deadline, and you should avoid making decisions hastily in the last minutes available. Do not waste time on discussing a
$100,000 expenditure if it will force you to rush through other decisions where millions of dollars are at stake.
• Decision input errors. Your team will have to bear the consequences of errors made in entering your decisions using the Markops Online software. These errors cannot be corrected after the run has been requested. Be particularly careful to specify your decisions in the correct units and to submit your decisions on time.
• Role of the instructor. The Markops Online instructor cannot manipulate the simulation parameters during the course of the simulated periods. The simulation has been designed to automatically generate environmental changes. The markets will evolve mainly according to the actions taken by the competing firms. There will, thus, be no interference by the instructor in favor of or against any team, and you should feel entirely responsible for your firm's performance.
In the final analysis, you will soon realize that, even though you have access to extensive marketing information, your judgment has to play an important part in making your decisions. As in most real business situations, there is no single specific solution to any of the problems that you will encounter. There are, however, alternatives that will clearly appear inferior after good analysis of the situation. There are other alternatives that will appear satisfactory but for which the relative merits depend mainly on the uncertainties of competitive actions. In this case, you will have to anticipate likely competitive behavior and to make choices under uncertainty. Over a series of decisions, sound analysis and good judgment will inevitably bear fruit.
We hope that participating in the Markops Online simulation will give you a better understanding of strategic and operational marketing concepts, and that you will enjoy this learning experience!
The StratX Team
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Markops Online ID Card
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