The reach curves and media viewing habits reflect what proportion of the population you can reach with a given Advertising or Public Relations (PR) mix. These are the same for both Advertising and PR partly because it is reasonable that the advertising reach and viewing habits should be similar for both product advertising and PR.
The sensitivity to Advertising and PR reflects how much each market segment is influenced by any Advertising or PR they are exposed to. If a segment has low sensitivity to PR, then even if they are exposed to a lot of it, there will be a much smaller influence than if they are highly sensitive to PR.
If a segment is highly sensitive to Advertising, then there is probably going to be a reasonable market share difference, but if there was low sensitivity to PR then you would probably only see a small market share difference (ie. you are probably wasting a lot of your PR spend and you should look at more effective ways of using that money).
The market segments have different sensitivities, so you need to find balance between Advertising Awareness and PR in each market.
The 2017 MikesBikes World Championship winners Siyi Tang , William Setiawan , Jiedong Chen, Jayca Y. Siddayao, Mingchang Liang and Robbi A. Harnass of Exodus from the University of Auckland have joined the MikesBikes Wall of Champions with their impressive performance in the competition!
Team Exodus competed against the best teams from around the globe and have achieved a Shareholder Value of $327.81.
To wrap up the 2017 MikesBikes World Champs, we have interviewed the team and ask them about their experience in the competition and what they thought about the simulation.
What is your decision making process within the simulation?
First, we analysed the market scenario then we looked at trends in pricing, marketing, financial performance and so on. We then compared these trends with our previous decisions and results.
Finally, we were able to determine whether we would have an offensive or defensive strategy. The most important thing for us is that the final decisions entered have been approved by all team members.
What was your strategy going into the simulation?
Our strategy was focused on developing low prime cost bikes. This strategy did not require a high investment in plant or workforce.
We then focused on our marketing campaign. We developed a marketing mix suitable for our strategy.
Knowing how to calculate the optimum marketing mix, we were able to reach more customers than if we just allocated a high expenditure on every media channel.
Finally, with regards to our financial decisions, we made sure to repurchase shares as soon as we had the additional funds and no profitable use for our extra cash. We were also able to pay out dividends to shareholders.
What challenges did you face? How did you overcome these?
Our competitors undoubtedly did their best to compete. They presented us with fearsome competition during the Championship. Our team also felt that some of the firms just gave up along the way and purposefully destroyed the market by dumping their prices. Pity moves indeed. But then again, it was one of the “unexpected” things that you would not expect to happen, especially during a fierce competition such as this.
Was there anything, in particular, you did that you think helped to prepare yourself?
One of the things that helped us win the world championship was the opportunity to compete with our fellow classmates. In a way, we were used to playing in such a competitive environment, with fearless competitors. However, even with such experience, there were moments during the world championships that we felt very overwhelmed by our competitors’ moves. Thus, once again, kudos to all who fought until the end.
What do you think of the business simulation?
We think MikesBikes simulation is a great way to teach people who want to learn Business Management. It has both practical and theoretical application that gives us real world experience that we would never get from attending traditional lectures and doing written tests.
For example, when we were looking to enter a more competitive market, we were intrigued to find more detailed information. Reports such as the Income Statement, Cash-Flow Statement, Balance Sheet, and Equity Movements Statements were extremely helpful. We made sure to analyze these reports every rollover.
Comments on your experience with the simulation itself
We had a great experience with the simulation. We are glad that we have used this simulation, especially for those of us who have never worked in the industry. By competing in the course competition at the University of Auckland and entering the MikesBikes 2017 World Championship, we learned so many new things, such as:
How to allocated our Marketing Expenditure in more attractive media channels
How to turn a significant investment in project development into something more profitable in the long run
How to calculate the cause and effect of the decision of repurchasing shares and dividends.
Nevertheless, we are honored to be called the winners of MikesBikes 2017 World Championship. There are many decisions that we made, which definitely could be further improved. We hope that newcomers will join the next world competition of MikesBikes, to stand beside us, and the rest of the MikesBikes World Champ Winners.
Check out the 2017 Competition Results here and the previous winners here.
In this interview, the team provides insight into their strategy, the tools they used to help develop their winning strategy and what they think of the simulation.
What is your decision making process within the simulation?
The decision-making process begins with checking the situation in the market. If you’re behind, the rest of the production and advertising decisions work mostly in response to other firms’ actions; if you’re ahead of the game, however, you have a lot more freedom to focus on nothing but maximizing income. Generally, we usually consider new products and developments, then possible changes to capacity and production, then possible changes to advertising, then financing and equity options.
What was your strategy going into the simulation?
The strategy from the very start was to try to dominate every market as soon as possible, to suck the competition dry and reach for a high SHV.
How did you begin implementing that strategy?
Astronomically high advertising budgets (or PR, in the case of road bikes) from the start, every time, targeted toward the most efficient audiences. Penetration pricing to help steal even more sales from the competition. New products as soon as possible, every time, to try to dominate the newer markets quickly. For example, when they became available, we immediately jumped at road bikes; our share in that market never fell below 80%.
How did you familiarize yourself with the simulation?
We played with the single player version for a few hours, trying out different strategies and generally discovering how the game worked and how each variable interacted with the others. We would even try rollovers with only one or two variables changed in order to find out the most optimal choices.
How would you describe the competition?
I believe that the competition did not take the same initiative in familiarizing themselves with the game, and so they were blindsided by their lack of market share after the first rollover. After one or two more rollovers, the market had shifted too much in our favor for them to recover very effectively.
What resources did you pull on to develop your winning strategy which led you to be a part of the MikesBikes Introduction Hall of Fame?
We used information from the guides and internet, along with all of the market information given in the simulation (for example, advertising effectiveness and bike-specific preferences). We also used the rough numbers from the first couple weeks to come to the decision that domination on all fronts is the best strategy.
What challenges did you face? How did you overcome these?
Decisions were difficult in the early stages because everyone started off on even footing, and each new decision option was mostly mysterious at the start. However, with experience, practice rollovers, deep experimentation, and dedication, we isolated the variables and won.
Was there anything in particular you did that you think helped to prepare yourself?
Offline rollovers are any player’s best friend, at any stage of the game.
How has participating within a course which uses a business simulation to supplement their teaching materials helped you? What do you think of the business simulation?
It gave a lot more context to the lessons, making them easier and more intuitive to understand. Often, lectures would include references to the current events in MikesBikes, which made them more engaging.
Comments on your experience with the simulation itself
Playing the simulation was a great, useful experience because it gave us the opportunity to look at the basics of the simulation and deconstruct the game in a classroom/team setting. Of all the things that we’ve had to pay for in each class, this was probably the most worthwhile expense.
In our MikesBikes Introduction to Business Simulation and our MikesBikes Advanced Strategic Management Simulation the main performance indicator is Shareholder Value (SHV). So of course one of the most common questions students ask is “how do I increase my shareholder value”?
What is Shareholder Value?
Shareholder Value (SHV) is the value to an investor of owning a single share in a company. As the Managers of your MikesBikes company, your key performance indicator will be SHV. Therefore, the success of your company will be measured by the amount of SHV you can create in comparison to your competitors. So your primary goal should be to increase or maximize your SHV.
Shareholder Value is a measure of:
Share Price (the value of one share in your company) + Dividends (all past dividends paid including interest)
Increasing your company’s profit requires a combination of increasing sales revenue while decreasing your costs.
Strategies to increase sales revenue:
Optimize your Retail Price: Is your Retail Price balanced between maximizing profit while remaining competitive?
Increase productivity of your factory.
Launch a New Product.
Find new customers through a better targeted marketing strategy: Profit is maximized through the efficient use of resources to deliver desirable products.
Strategies to decrease costs:
Decrease inventory.
Reduce the Prime Cost of your Product(s).
Decrease wastage in production.
Focus on your more profitable products.
Earnings Per Share (EPS)
Earnings Per Share (EPS) is calculated using your Net Earnings (Profit) divided by total Outstanding Shares.
Example 1: Firm A has 2 million shares issued and made $1 million profit, EPS = $0.50
Example 2: Firm B has 20 million shares issued and made $10 million profit, EPS = $0.50
Example 3: Firm C has 2 million shares issued and made $2 million profit, EPS = $1.00
Debt to Equity (D/E) Ratio
A higher D/E ratio means higher risk which results in a lower share price and SHV.
Dividends
A dividend is a payment by a company to its shareholders, once they are sufficiently profitable, to allow shareholders to make a return on their investment. So dividends increase the value in owning your shares, therefore, dividends have a positive impact on your Shareholder Value.
Note: MikesBikes restricts the maximum size of the dividend payment that you are allowed to make based on your average earnings per share to stop you accidentally bankrupting your company.
Strategy
To do well in MikesBikes you must develop a long-term strategy. In the 1980’s, Michael Porter did considerable work in defining three types of strategies that “fit” a business unit into its environment. These are called differentiated, cost and focus strategies. These are especially pertinent in the MikesBikes scenario. For further information see Michael Porter’s Ideas on Strategy.
How to win MikesBikes?
Other common questions we are asked are:
Is there one “winning strategy” in MikesBikes?
How is there a “How to Win MikesBikes Guide”?
Are there any MikesBikes cheats?
The answer to all these questions is NO. However, that is in fact a very good thing. The most important outcome for you as students is to learn the key principles behind making effective and prudent decisions. We hear all the time from past students that learning these core business concepts was key to their success in job interviews and their subsequent career.
A lot of our competitor’s business simulators tend to be over simplistic and rely on computer controlled (robot) opponents. As a result, the same decisions entered in one iteration of the simulation can be used across the class or across semesters to yield the same results. This means cheat sheets are often developed to be shared around the class or across the internet.
Here at Smartsims we strive to ensure every iteration of our simulations is unique. This is done through a sophisticated model, a dynamic simulation scenario, and the use of real student competitors (rather than computer robots). So although the business concepts and decision-making principles taught and applied are the same for every student, the strategy and decisions adopted by each team must be specific to their scenario and their competitor’s strategy and decisions. As a result, every iteration of the simulation is unique. The upside of this is it also makes teaching a business course with a simulator a new and exciting experience each semester.
If you produce enough to meet demand, then your delivery index will be high, as your customers generally can buy your goods as soon as they want them.
If you don’t produce enough to meet demand, then your delivery index will decrease as your customers have to wait for goods to be delivered to your retailers. ie. your retailers will stock out of your products several times per year.
Your delivery index will also be affected by how much excess demand you have. In general, if there is only a little bit of excess demand then your delivery index will remain relatively high, and it will decrease by more as the excess demand increases.
If you can manufacture goods quickly and keep a reasonable number of weeks of finished goods on hand, then in general your delivery index won’t be affected too badly.
You can read more information about this in the Player’s Manual, Chapter 3: Operations.
Do you have a question suggestion for our next question of the week? Send us a message. We also post tips and tricks on our Facebook and Twitter pages, so make sure you’re following us!
“It’s not the will to win , but the will to prepare to win that makes the difference.”
Paul Bryant
Students across the world were invited to join the SuperFan Quiz competition to answer questions about MikesBikes Advanced and MikesBikes Introduction with the fastest time and with the most correct answers. Out of over 200 participants, we now have two that reigned supreme in the competition and will be awarded the MikesBikes SuperFan title.
Firstly, we would like thank everyone that entered our MikesBikes SuperFan Quiz and made this competition a success. It is so exciting to see that there are plenty of true-blue MikesBikes SuperFan!
The long wait is finally over.
We are proud to announce that our 2017 MikesBikes SuperFan Quiz winners are, Xiaoying Ping from the University of Auckland and Jennifer DeWitt from Tarrant County College District. These two students certainly had the will to prepare to win and finish the quizzes with the fastest time, and with all correct answers! A big congratulations from all of us here at Smartsims!
Xiaoying and Jennifer were generous enough to share some advice to future students and things they have learnt from the simulation. Here’s what they have to say:
Xiaoying Ping from the University of Auckland
Hi guys. I am Xiaoying Ping, an international student at the University of Auckland. It is really an honor for me to win the MikesBikes Superfan Quiz Competition! For me, the MikesBikes simulation is not only a kind of software but also a valuable practice business tool. I learned a lot of things, such as decision-making skills, communication skills, leadership skills, and teamwork skills from the MikesBikes simulation. It was really a valuable and memorable experience for me. Hope all your guys could acquire more useful business knowledge through the MikesBikes simulation. Good luck and enjoy your business journey in the MikesBikes simulation!
Jennifer DeWitt from Tarrant County College District
My advice to future students is to make sure you set aside ample time to make your decisions with your teammates, because a twenty minute phone call isn’t going to cut it. Something I wish I would have done differently is read the MikesBikes Intro Players Manual. I didn’t realize until the very end of the simulation how much useful information is in that link!
Make sure you are following us on Facebook and Twitter, so you’re updated with our latest news and events!
Is your MikesBikes Company struggling to make sales or losing cash? If your firm’s financial position has stagnated or is deteriorating, don’t lose hope. This is a great opportunity for you to review your strategy and make changes, and in the process, learn valuable life-long lessons about business decision-making.
Here are five ways to help you improve your performance in MikesBikes:
1. Conduct a Situation Analysis
Performance in MikesBikes, and indeed the real-world, is determined by three things:
Your decisions;
Your competitor’s decisions; and
The market you are operating in.
If your Shareholder Value has been dropping, you must first identify why this is happening. To do this, ask yourself the following questions:
Are my decisions appropriate for the market and consumer preferences?
Has the market conditions or consumer preferences changed?
How have competitor decisions affected my performance?
The following reports in MikesBikes will help you to answer these questions:
Maximizing return on expenditure is the key to success in MikesBikes, represented by your company’s profit. Each functional decision area contributes to your company’s profit:
Marketing: Are you overspending on Product Advertising, Product PR or Branding? As a rule, your marketing expenditure should not exceed 30% of your Wholesale (NOT retail) Sales Revenue.
Distribution: Are your Retail Margins higher than the industry average?
Production: Is your Factory Idle Time too high (more than 10%)? Or do you have Lost Sales?
Product Development: Have you conducted product development to reduce the Prime Cost of your products? Have you taken advantage of empty or low competition market segments?
You can also contact us with any specific questions.
4. Seek a Cash Injection
An unfortunate reality of business is that companies fail from time to time. However, even if your company does become insolvent (signified by a Share Price of less than $1) it is not the end of your journey as a MikesBikes business manager. An interest-free cash injection, combined with coaching from the Smartsims Support Team, will give you another change at success to assist your firm’s recovery. Talk to your instructor if you believe you qualify.
5. Set New Goals
Setting new goals for your company can be important for your team’s focus and motivation. These goals should be small and achievable.
Before everything else, getting ready is the secret of success.
Henry Ford
This week, we’re featuring one of the latest Hall of Fame entrants, Logun Williamson from the University of Utah. He landed 10th place in the Music2Go Multi-Player (All Time) Hall of Fame.
The video below will demonstrate how to make a Sales Forecast for an existing product and a new product in MikesBikes Introduction, as well as the complementary production decisions for both.
We have provided you with the script for the video below to read through:
“This video will demonstrate how to make a Sales Forecast for an existing product and a new product, as well as the complementary production decisions for both.”
How do I conduct a Sales Forecast?
A Sales Forecast is a prediction of the number of units we believe we can sell in the year ahead.
This should be calculated using your predicted market share of the total market size for the year ahead.
Estimated Market Size Next Year x Percentage Market Share
What is our market share?
So what we need to do first is determine what our current market share percentage is. To do this, view the Market Summary Report. We can see for our RC_Rockhopper product, we have a market share of 55.5% of the total unit sales last year. We then need to find out what the total market size will be for the year ahead.
What is the estimated market size next year?
If we look at the Market Information report, we can see that the demand forecast for the year ahead is 42,000 units.
Calculate our Sales Forecast
Therefore, our sales forecast is calculated by our market share of the forecast total market size for the year ahead. In this example that would be 55.5% of 42,000 units. This is 23,310 units.
Now that if you believe that based on your decisions for the year ahead you can increase your market share from last year, you would use this adjusted market share instead of last year’s market share.
For this example we believe our market share will stay the same so our Sales Forecast will be 23,310 units. We enter this into Price screen under “Sales Forecast.”
Once you have entered your decision, click “Apply.”
Note the warning displayed here. This is telling us that our current Planned Production will not allow us to meet our Sales Forecast. This is when the difference is greater than 10%. So we know we need to go to the Production Planner screen to ensure we are producing enough products to meet our Sales Forecast.
Production Planner
We can see on this screen our Sales Forecast of 23,310 units in this screen. We can also see if we have any existing stock from last year, which in this example is zero. So our Planned Production to meet our Sales Forecast for the year ahead is equal to our Sales Forecast.
Enter the figure and click “Apply.”
If we did have any stock to carry over, we would subtract these units from the Planned Production figure.
New Product Sales Forecast
For a new product the challenge is we do not have an existing market share percentage to work with. Therefore, a Sales Forecast for a new product can only be based on the Forecast Total Market Size.
In this example we want to launch into the Road market.
The Market Information report tells us that forecast demand for the year ahead is 6,500 units. If we then look at the Market Summary Report, we see that there were no competitor products in this segment last year. However, given the opportunity an empty market segment creates, we should assume that at least one or two other competitors will also launch into this market. Therefore, it is reasonable for us to expect to secure a third of the Road market segment’s total size, which is approximately 2,160 units. Click “Apply.”
Production
We then need to our Production decision.
Conclusion
This concludes our brief demonstration on how to conduct a sales forecast and make complementary production decisions.
For more in-depth information, you should view the tutorial videos on our website.
If you have any questions, please feel free to email us at help@smartsims.com
“Branding is simply a more efficient way to sell things.”
-Al Ries
Here are the Top 3 reasons why Branding is important in MikesBikes:
1. Branding increases the effectiveness of your product advertising and results in increased product awareness.
2. In the next period, consumers “forget” the advertising to some extent, but any new branding adds cumulatively to what is left.
Note that branding does not contribute to the effect of public relations.
About half of your brand awareness will carry over from the previous period. The curve shows the increase in brand awareness (on top of what is carried over) achieved by various levels of expenditure.
3. This video is an excerpt from the MikesBikes Advanced Sales & Marketing video, which sums up why Branding plays an integral part in your Marketing strategy.
