Copyright, 2000South-Western College Publishing A Game of Strategy in a Global Industry

Copyright, 2000South-Western College Publishing The Global Business Game’s Elements n Industry n Countries n Products n Distribution Channels n Pricing n Sales Promotion n Sales Offices n Product Differentiation n Production n Raw Materials n Finance n Foreign Currencies n Strategic Alliances n Special Actions

Copyright, 2000South-Western College Publishing The Television Set Industry n A truly global industry with great product standardization. n Basically a capital-intensive industry with components being sold as commodities. n The product is a prized home appliance. n Product saturation is complete in the more advanced economies. n Product reliability an important determinant of a brand’s long-term demand.

Copyright, 2000South-Western College Publishing United States n The world’s single, largest market. n Relatively low population growth and a saturated television set market. n Prefers larger-sized, medium quality sets. n Requires large marketing expenses to reach market. n Relatively high labor costs but also has high per capita income levels.

Copyright, 2000South-Western College Publishing Mexico n Possesses a relatively inexpensive labor force within NAFTA. n United States is its major export market. n Has had a relatively high inflation rate. n The country’s real GDP growth will be very high although population gains will result in low per-capita incomes.

Copyright, 2000South-Western College Publishing Germany n A wealthy nation with high labor costs within the European Union. n Dominates the European Union and the euro’s value. n Prefers smaller, high quality TV sets. n Low population growth with annual TV set sales of about 7.5 million. n GDP should grow about 5.5% a year.

Copyright, 2000South-Western College Publishing Spain n Has suffered high unemployment for a number of years. n A low-growth country. n A relatively unsaturated television set market. n Set sales should amount to about 2.3 million a year.

Copyright, 2000South-Western College Publishing Taiwan n Has a well-disciplined and well-trained labor force. n Economically stable. n Friendly towards foreign manufacturing operations. n TV set sales should amount to about 1.2 million a year with generally high growth.

Copyright, 2000South-Western College Publishing Thailand n A relatively poor country with the lowest labor costs within APEC. n Labor force somewhat undisciplined. n Low domestic demand for smaller, low quality sets. n High inflation rate and with high interest costs. n Politically and economically unstable.

Copyright, 2000South-Western College Publishing Products n 25” and 27” television sets. n Wholesalers carry your company’s own national brand for retail re-selling. n Can obtain bids for contracts to sell private-branded sets to the Home Electronics King retail chain.

Copyright, 2000South-Western College Publishing Distribution Channels n From the factory’s Distribution Center. n Via Independent Wholesalers. n Via Company-Owned Wholesalers. n Direct to Home Electronics King, Inc.

Copyright, 2000South-Western College Publishing Shipping n Slow, relatively inexpensive Surface. n XAir, fast air express. n Contract orders will not be filled unless allocated.

Copyright, 2000South-Western College Publishing Pricing n Manufacturer’s Suggested Retail Price (MSRP) versus “Street Price” or Actual Price. n Reported Actual Price one quarter late. n Actual Price usually discounted from MSRP. n Products somewhat price insensitive due to sales promotion efforts, brand name recognition and customer loyalty.

Copyright, 2000South-Western College Publishing Sales Promotion n Sales Representatives engage in personal selling efforts. n Non-personal sales promotion through trade and consumer newspaper advertising. n Product sales commissions a strong motivator. n Sales Representatives may quit if their income falls below reasonable expectations.

Copyright, 2000South-Western College Publishing Sales Offices n Sales Representatives work out of Sales Offices. n All orders handled at the Sales Office level. n All Trainees receive field training in their assigned Sales Office. n Each Distribution Center has a Sales Office. n Free-standing, independent Sales Offices can be added for greater customer service.

Copyright, 2000South-Western College Publishing Product Differentiation n Tells customers the product is different by “shouting” through heavy advertising. n Makes products more reliable through Quality Control efforts and better raw materials. n Provides customers with meaningful product improvements through patented R&D efforts. n Patents can be purchased from other firms.

Copyright, 2000South-Western College Publishing Production n Assembly lines can operate for two shifts plus Saturday overtime. n Workers assigned to 25” and 27” sets. n Higher-skilled 27” workers make their own sets and 25” TVs if assigned. n 25” set workers can only make their own sets. n Automatons increase the plant’s output and are very reliable. n All plant and equipment must be maintained or it breaks down.

Copyright, 2000South-Western College Publishing Raw Materials n Two types of subassemblies are required to make a complete set. n Subassemblies must be ordered one quarter in advance. n Different grades of subassemblies are available. Their mix is a heavy contributor to product quality. n Subassemblies purchased in 100 unit lots.

Copyright, 2000South-Western College Publishing Finance n Must anticipate the firm’s cashflow needs. n Both equity and debt financing available. n Emergency funds dispensed at very high interest rates. n Dividends expected. n Funds can be moved between countries. n Dividend taxes paid on profits transferred to Home Country.

Copyright, 2000South-Western College Publishing Foreign Currencies n Transactions in national currencies. n Exchange rates may fluctuate over time. n Foreign sales and costs automatically converted to Home Country’s currency.

Copyright, 2000South-Western College Publishing Strategic Alliances n “Partnerships” or strategic alliances can be formed. n Sell or buy used Automatons. n Manufacture sets for your competitors as a subcontractor. n Purchase Patents or license a Patent.

Copyright, 2000South-Western College Publishing Surprises and Special Actions n Anything can happen… labor strikes, subassembly price increases, sales reps quitting, interest rate changes, bankruptcies and company reorganizations. n Critical Incidents in Strategic Management. n Merlin Group Ltd. Reports. n Administrator’s Fines, Penalties and Credits.