Business Strategy Game Final Paper
BSG Final Paper
Team B Members: Calvin Amos Momodou Drammeh Sheila Hutton Shanika Olivero Rebecca Wentworth
BUS5480
Strategic Management
April 28, 2012
Instructor: Dr. Iaquinto
Business Strategy Game Final Paper 1
Summary of Team B Performance Out of the competing six groups, our company, One Step Up, ultimately came in second place in Year 15. As a team we were pleased with our overall rank of second place, though we certainly had some weeks that were better than others. With regard to the Best in Industry Standard, there were areas we struggled with throughout the course of the game. Of the five performance areas, credit rating was the only area that our weighted average scores were above the investor expected standards. In each of the other performance areas we did meet investor annual expectations at least once during the five year period, with the exception of image rating, whereby we came close, but never quite met expectations during any given annual performance period. Although our Team B (One Step Up) ultimately came in second place in Year 15, with regard to the winning team (Team C), we did not end up with a performance that was on the same tier level as the winning Team C. In all categories except for credit rating (which ended u p being the same “A” rating); they significantly outperformed our company in the other individual comparison areas. The ultimate lessoned learned is that the BSG game and industry competition is all about doing relatively well in several areas rather than exceedingly well in only a couple of areas. This is based on the fact that several companies graded better than us in certain areas, yet overall they rank below us.
Lessons Learned There were three significant areas of lessons learned that stood out to our team: 1) It is not surprising that the winning team did well on their EPS, however more surprising is that two teams, EDSY and E-shoes, who ranked behind us also did well on EPS, exceeding the investor expectation in three out of five weeks. The fact that some companies did better than we did in certain graded areas, yet ultimately lost to us, goes to show that the BSG game and industry competition is all about doing relatively well in several areas rather than exceedingly well in a couple of areas. 2) A second and important lesson that we learned was in regard to the Branded Production area. At first we simply were not manufacturing enough shoes to be competitive.
Business Strategy Game Final Paper
Fortunately, we caught on to the problem by Year 2 and increased production so we would not run out of product and lose sales. This, along with aggressively increasing our spending on Best Practice Training, proved to be the valuable decisions in the area of Branded Production. 3) Thirdly, going into the final week of the game, we felt like we learned a lot about operating within the industry, and we felt that we had a good understanding of the strategies being used by the other companies within the industry. This was generally evidenced by our continuing improvements from last place in year 12 to second place at the end of year 14. While knowing we could not beat the winning team C, our estimates and expectations were set to meet all investor and industry standards. However, what we did not count on was Team A company, which clearly had a low S/Q and low price strategy through out the game (steadily dropping its S/Q down to S/Q 2), would change its strategy on the last week of the game to become an industry average S/Q rating and industry low price leader (raising their S/Q by 4 points to S/Q 6 and dropping their retail price down to an industry wholesale price).
The significance of Team
A’s last year strategy change was that it caused the industry average S/Q to shift upward to S/Q
7, and the industry average price to shift significantly downward. Team A’s sudden S/Q 6 rating, now equal to our own (which was now below the industry average), coupled with an industry lowest price, allowed their company to siphoned off significant sales and market share from our company strategy in year 15.
During year 15 strategy discussions, we discussed
raising our S/Q to 7, in case of something like this, but did not think the overall S/Q and price average would change by much, based on the current position of each company. The lesson learned is that you have to expect the unexpected, and to watch what area your company may be most vulnerable to within the industry.
Team B Annual Performance vs. Targets Summary
Although we ended up in second place within the industry, our overall company performance was mixed at best and definitely has areas that need to be improved. Of the five performance areas, credit rating was the only area that our weighted average scores were above the investor expected standards. Although, in each performance area we did meet investor annual expectations at least once during the five year period, with the exception of image rating,
Business Strategy Game Final Paper
whereby we came close, but never quite met expectations during any given annual performance period.
Details
Earnings per Share (EPS) Results
The chart below shows the annual target (in parenthesis) for EPS and our annual results below.
(Team B results in $) With a final rated average of $2.43, we clearly missed investor expectation on EPS year after year. Our best performance on investor expected EPS were years 11 and 14. Although we failed to meet the expected EPS on those two years, we happened to miss it by the smallest margins, i.e. $0.29 per share and $0.24 per share respectively.
Stock Price Results
The chart below shows the annual target (in parenthesis) for Stock Price and our annual results below.
(Team B Results in $) With the exception of year 14, we failed to meet expected investor stock price. In year 12, we had the lowest stock price in the industry, but bounced back somewhat in year 13 ($30.56), and actually exceeded expectations in year 14 at $41.59. The final year 15 saw stock our Team B stock price drop again to $24.50, primarily due to an unexpected strategy change by an unexpected company, which siphoned off significant market share. This will be discussed more in lessons learned.
Credit Rating Results
The chart below shows the annual target (in parenthesis) for Credit Rating and our annual results below.
Business Strategy Game Final Paper
(Team B Results) With the exception of year 12, we exceeded investor expected credit rating in all the other years, and ended with an overall "A" credit rating. Managing our credit was one of the bright spot for our company. This was partly accomplished by paying off certain debts early and then borrowing strategically based on our company goals.
Image Rating Results
The chart below shows the annual target (in parenthesis) for Image Rating and our annual results below.
(Team B results) Ending with a final weighted average of 66, we missed our image rating goal every year, starting in year 11 with a low of 59. However, we steadily improve each year to only missing it by two points (score 68) at the end of year 14. Although in the last year 15 we dropped by two points end the game at 66. This is partly attributed to non-aggressive celebrity bids, which was based on our original internet strategy, which we abandoned after year 12.
Return on Equity (ROE) Results
The chart below shows the annual target (in parenthesis) for ROE and our annual results below.
(Team B results in %) With a final weighted average of 14.4%, we reach our expected ROE two out of the five years and missed it by less than 1.3% on another two of the five years. Thus our results were very respectable with the exception of the final year 15 (at 12.2%), which missed by 2.8%. This drop is primarily due to an unexpected strategy change by an unexpected company, which siphoned off significant sales and market share. This will be discussed more in lessons learned.
Business Strategy Game Final Paper
Team B Performance vs. Best/Winning Company Summary
Although our Team B (One Step Up) ultimately came in second place in Year 15, with regard to the winning team (Team C), we did not end up with a performance that was on the same tier level as the winning Team C, which appeared to have a strategy of high S/Q rating with industry low internet price and above average wholesale price. In all categories except for credit rating (which ended up being the same “A” rating); they significantly outperformed our company
in the other individual comparison areas. One interesting observation is that while normally having a strategy of above average wholesale pricing, the winning Team C, correctly guessed the need to protect that wholesale market share during the game’s last year, by lowering its
wholesale price to near the industry low, and thus eliminating any market share siphoning by any wholesale price lowballing companies in the last year of the game. Details
We ended up with an average EPS of 2.43; we were not typically very far off from the investor expected EPS, but always managed to miss it by a least a few points. In contrast, the Cosmos company, which wound up in first place in Year 15 EPS of $4.41, exceeded the investor expected EPS four out of the five weeks we played the game. ROE was another example of an area where the winning Team C dominated throughout the game ending with a average 16.7% ROE, however we did managed to hold our own and in the end received a respectable average score of 14.4 compared to Industry standard of 15. When looking at Stock Price, if we examine our ending Game-to-Date Best in Industry score of 7 (stock price $24.40) it holds up well compared to five of the six companies that played. We came in second with a 7, and the teams that came in third received a 5 (stock price $17.76). However, the Cosmos company blew every other team away with a final Game-to-Date Best in Industry score of 20 (stock price $73.76). Obviously this was an area the Cosmos team excelled in and the rest of our companies never found our stride. In the area of Image Rating the One Step Up team struggled throughout the game to improve our rating. Our Year 13-15 average was 66 compared to the Cosmos Company’s score
Business Strategy Game Final Paper
of 93; again our score was average compared to five out of six teams, but nowhere close to the winning team’s score.
Credit rating is the only area our Team B, either did better than or equal to the winning team C every year of the game’s performance period, except year 12. For each year of the game,
our credit rating was A-, B, A+,A+ and A, where as Team C credit rating was B-, A,A,A and A. We ended up having the exact same final credit rating of A.
Team B Performance vs. Industry Best A+ Credit Rating Summary
Our team did quite well with regard to our credit rating; we never fell below a B and often received an A+. We ended up with a Year 15 Best in Industry and Game-to-Date Best in Industry crediting rating of A (the same as the winning team had, with both of us receiving 19s). Details
In year 11, investors expected a credit rating of B+, with a rating of A-; we outperformed the expected credit rating. Group A had the highest credit rating that year with a rating of A. In year 12 investors expected a credit rating of B+; we performed at B and missed the expected rating. With a credit rating of A, group C had the best rating that year. In year 13, investors expected a credit rating of B+; we performed at A+, and had the highest credit rating of any group that year. In year 14 investors expected a credit rating of B+; we performed at A+, and again, had the highest credit rating of any group. In year 15, investors expected a credit rating of B+; we performed at A and tied with Group C for the best credit rating that year. With the exception of year 12, we exceeded investor expected credit rating in all the other years.
References BSG Footwear Industry Report (p.2 and p.3) Retrieved from: http://www.bsg-online.com/
