A NON-COMPUTERIZED MARKETING PLANNING AND STRATEGY GAME New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 254 A NON-COMPUTERIZED MARKETING PLANNING AND STRATEGY GAME Henry C. K. Chen The University of West Florida INTRODUCTION Since the AMA game was first introduced in 1956, the increasing interest and use of marketing games as teaching instruments has been evidenced. Numerous general planning and functional games have been developed. The most widely adopted marketing games today are the Carnegie-Mellon game, the Carnegie Tech game, the Harvard Business School Simulation and several other functional games. The common characteristics of these games are the intensive study of the interaction of the complex environments incorporated in these games and the utilization of sophisticated computer programs for controlling the input and output necessary for game operation. Effective utilization of these games require from the players: (1) an ability to abstract the interactive relationships among the variables incorporated in the game, (2) the commitment of a vast amount of time for the preparation of computerized inputs, (3) a relatively lengthy lapse time designated for the game playing, and (4) the availability of considerable computer facilities and computer time. However, due to the various environmental settings of different institutions of higher education, many small colleges are not endowed with the conditions which are necessary for the successful utilization of complex marketing games. First, the environments encountered by many of the small colleges are generally characterized by students with limited knowledge in marketing and limited ability to abstract the complexities incorporated in the highly sophisticated marketing games. Second, the quarter system which normally runs nine to eleven weeks impedes the wide use of time consuming games. A single quarter is too short for a student to completely familiarize themselves with the interactive relationships incorporated in a sophisticated marketing game and to subsequently execute the time consuming preparation of computerized inputs, punching input cards, and picking up the outputs. Furthermore, in a college where a majority of the students commute to school or work full or part-time they do not have the great amount of disposable time required by many complex, computerized, marketing New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 255 games. Finally, small institutions where the computer facilities are scarce and the demand of computer utilization is high, the output turnaround time is relatively long. Consequently, the execution time necessary for a sophisticated game will be lengthy and, therefore, the umpire is unable to effectively control the output turnaround time. These factors make the operation o a sophisticated and time consuming game impractical. Recognizing the environmental constraints mentioned above and inspired by the success of business games as an effective teaching instrument, the author has developed a non- computerized marketing simulation game. CHARACTERISTICS AND OBJECTIVES OF THE GAME The non-computerized marketing planning and strategy game developed involves 12 interactive decision variables. Since the game only involves limited variables, a player is expected to be able to grasp the relationship and the trade off of each variable introduced in the game. The player is not required to utilize computerized input; thus, the time demanded for input preparation and the waiting time for the turnaround of game outputs is minimized. All inputs are screened by the designated umpire. Consequently, input errors which are frequently induced in key punch decisions are eliminated. The elimination of the input error minimizes the disturbances of the overall output of the industry induced by key punch errors. The main objectives of this game are multiple. A sophisticated player is expected to be involved in the following decisions: 1. Long and short range planning, 2. Competitive strategy, 3. Growth strategy, 4. Goal setting and the control of routine operations. 5. Marketing auditing, 6. Internal resource constraints and strategic decision-making, 7. Study of the functional relationships among variables, the trade-offs involved and the determination of the best strategy to achieve a firm’s predetermined goal. ABSTRACT OF THE GAME 1. Decision Variables of the Game The decision variables involved in this game include the marketing potential, personal selling, advertising, research and development, consumer preference, research and product improvement, production and inventory, finance and accounting, competition, marketing information, general planning, marketing growth and competitive strategies and pricing. 2. General description of the game The Market: The market consists of the U.S., which is divided into six regions and 20 territories. Each territory consists of one state or several states. The marketing potential of each territory New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 256 is different. This geographical division allows a firm to do regional advertising and conduct regional consumer preference and product improvements in one region at a time. The product is in its growth stage, hence the total market potential will increase at a rate of 3-4% quarterly. The initial total market potential is not known; however, the player may buy this information from the umpire at the cost of $2,000. Personal Selling and Sales: The player determines the allocations of his salesman among the territories. The number of units sold in each territory depends upon the firm’s market share which in turn is a function of the firm’s total marketing effort relative to its competitor’s efforts. Each salesman is allowed to make two calls in any given quarter and there is no limit to the number of salesmen who may call on one territory in one time period. Sales in any given quarter will be assumed to occur in the beginning of the quarter. Every salesman costs $10,000 when hired and $2,000 per quarter in salary regardless of whether the salesman is in the training program or works in the field. It takes one quarter to recruit and three months to train a salesman. Thus, a salesman joins the sales force after a two quarter time lag. Advertising: Product advertising in any quarter increases the firm’s total marketing effort. A company may buy either national network or regional advertising or both. The national network is more expensive and less effective, however, it covers the whole country (six regions). The regional advertising, however, covers only the region or regions that the company designates. Both the national and regional advertising is effective in the current quarter only and there is no lag effect. Advertising costs $3 ,000 per page/minute per region. The national network costs $10,000 per page/minute, and there is no constraint on how much advertising a company wishes to spend in any given quarter. Pricing: The industry retail price for each product averages $10,000. However, in order to maximize profit and to gain competitive advantages, a firm is allowed to set the unit price higher than industry average price or below average price at any given quarter. If a firm should choose to set the unit price below or above the industry price, the price per unit must be set at an increment of $500 around the average price. That is, a firm may set the price per unit at $10,500, $11,000...or $9,500, $9,000 and $8,500. The minimum selling price per unit is $5,500. If a firm sets a selling price below $5,500 the firm will be involved in an Anti-Trust lawsuit and the firm is penalized $50,000. Consumer Preference Research and Product Improvement: The product is an industrial good (truck) with three differentiating features: horse-power, capacity and refrigeration. Due to the differences in regional preference, a region in any given year, may prefer one of the features over the other two. If a company can find out the regional preference for a given region and New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 257 improve the product on the basis of the findings, the company will increase its marketing effort and competitive advantage in the region where the preference is demonstrated. The cost of finding out the regional preference is $5,000 for each region. The company may conduct the research in any region or all regions for any given year. Product improvement can be made in any of the three features. The minimum product improvements cost $4,000. A company may invest in multiples of $4,000. There is no upper limit for product improvement investment. The Regional preference changes every year and a firm may purchase this information in the quarter prior to the quarter in which the preference change occurs. Research and Development: If a company can develop a new product it gains a competitive advantage. The minimum research effort per quarter costs a minimum of $10,000, and a company may invest more than that in multiples of $10,000. Plant and Production, Inventory: The initial plant costs $150,000 and each subsequent plant costs $30,000. The maximum output for each plant is 5 units per quarter. Overtime production is allowed at the cost of 30% higher than the production of the company’s production level. It takes 3 quarters to construct the initial plant, and one quarter for subsequent plant. The total production lead time is six months. The firm must pay the construction cost as soon as it decides to start construction. The company is allowed to idle or to dispose of excess capacity. The idle plant can be reopened in any subsequent quarter. The penalty for idling one plant during any given quarter is $6,000. The penalty for disposing of a plant is $30,000. The average cost of production for capacity of 5 units is $6,000. As capacity increases by additional production plants, total fixed costs rise slightly and the unit variable cost decreases. Consequently, the unit average cost declines as product increases. When a unit is sold, it is deduced from inventory on a first-in, first-out basis (FIFO). Inventory carrying cost per unit for each quarter is $300. A firm is allowed to sell its inventory to its competitors at a negotiating price between the buyer and seller. Finance and Accounting: The management of a company’s available capital is of critical importance. Each company starts with $750,000 of capital. Sales are made on an accounts receivable basis, and the collection lag for accounts receivable is 2 quarters. If a company is in need of cash, the company is allowed to factor its accounts receivable New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 258 at a cost of 20% of the amount factored. Accounts receivable are factored on LIFO basis (last-in, first-out) Competition: Each company competes for the same territories with the same product. The number of units sold by any given firm in a given territory proportional to the total marketing efforts of the firm relative to its competitors’ total marketing efforts. Sales are sold only on a one unit basis. If the total marketing effort of a firm in any given quarter in a given territory is smaller than one unit, the firm will not get any sales in that quarter. However, the firm’s uncompensated effort will be carried over to the subsequent quarters in that region. In the subsequent quarters, if the firm has accumulated enough marketing effort for one unit, the firm will be credited a sale of one unit for its accumulated marketing effort. A summary of the cost information is attached in Appendix A. OPERATION OF THE GAME The Players: The class is divided into several teams. The total demand of the industry is given prior to the start of the game. In a quarter system, it is suggested that the duration of the game is 20 quarters. However, if time permits, the umpire may extend the duration of the game to 24-28 quarters. The first through fifth quarters is designated for the development of marketing strategy. During that period each team has to submit input indicating the number of plants and the number of salesmen the firm intends to acquire as well as other specific information such as regional potential and regional preference that the firm intends to purchase. Competition starts at the 6th quarter. The Input and Output Sheets: Players are required to submit input twice a week on a designated day and time, and receive output the following day. The Standard input sheet is presented in Appendix B. The standard output sheet includes a profit/loss statement, a balance sheet, a cash flow schedule, an inventory ledger as well as other relevant information required by the player. The Umpire: One umpire is employed. The main function of the umpire in any given quarter includes: 1. Collection and screening of the inputs from each team, 2. Calculation of total marketing efforts for each territory by each firm, 3. Calculation of the market share and sales for each firm, 4. Preparation of the profit and loss statement, balance sheet, inventory sheet, and cash flow sheet for each team, 5. Recording the output of each team on the firm’s ledger, 6. Providing information purchased by the player. The whole calculation and statement preparation requires approximately one hour for a well-trained umpire. New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 259 RULES OF MARKETING EFFORT AND COMPETITION A firm’s total marketing effort in a given territory in any given quarter is determined by the firm’s selling price (Pr), personal selling (Ps), national advertising effort (An), regional advertising effort (Ar), product feature improvement (Pf) and new product (Pn) set by the firm at that given quarter. With the exception of price effect, the total marketing effort of a firm in a given territory is the additive effect of each individual decisions variable. The marketing effort index of each variable at different decision levels is presented in Appendix C. GAME EVALUATION The evaluation of the player: A five year (20 quarters) duration is assumed for the game. Player’s performance will be evaluated by: 1. The amount of net worth at the end of the 20 quarters. 2. The self-critique paper. Students are required to write a short self-critique paper upon the completion of the game. The paper should explain his strategies, strengths, weaknesses and other managerial problems encountered. CONCLUSIONS Most of the computerized marketing games today involve complex environments and are time consuming in preparing of inputs and executing the game, and demand sophisticated computer facilities and computer time. Many small colleges are characterized by: students with limited knowledge and limited ability to abstract the interactive relationships among variables incorporated in these sophisticated games; short quarter system, and constrained computer facilities with scarce computer time. These facts make the execution of sophisticated and time- consuming marketing games impractical to these institutions. This non-computerized game is developed primarily for institutions encountering a disadvantageous environment described above but desiring to have students benefit from the learning of a simulated New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 260 marketing game. The game simulates a real business world situation with limited interactive variables and requires approximately one to two hours for one umpire to hand calculate each quarter. This marketing simulation game has been tried and revised several times during the past two years. The general reactions from the players were overwhelmingly favorable. The typical comment is that the marketing game definitely functions as an educational instrument; it integrates all the knowledge taught in finance, accounting, and the basic marketing disciplines in the formulation of competitive and growth strategies. It enables students to recognize the importance of internal constraints on the decision making process and the crucial importance of goal setting and long and short range planning. New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 261 New Horizons in Simulation Games and Experiential Learning, Volume 4, 1977 262 Table of Contents Volume 4, 1977 Double Play for Gaming Effectiveness Adaptive Rule Changes in Computer Simulation Gaming Œ A Means of Pedagogical Reactive Interchange Monte Carlo Simulation in Personnel Management Training Teaching About the Implementation of Job Redesign Using Simulation and Group Discussions An Interactive Simulation of Private Sector Collective Bargaining Leadership Evaluation and training through Behavioral Simulations: Method, Results and Future An assessment of the Effect of Experiential, Simulation and Discussion Pedagologies Used in Laboratory Sections of an Introductory Management Course An Experiential Understanding of the Trust Dimension Using Consulting Cases to teach Business Policy An Experimental Testing of Teaching Methodologies in Marketing Interpersonal Skill Development: The Experiential Training Unit (ETU) and Transfer of Training An Analysis of the Relationship between Personality characteristics and Preferred Styles of Learning Analysis of Effective Communication Skill Development in Graduate Business and Engineering Experiential Education Changing Perceptions of Learning in a Simulated Environment Student Perceptions: Simulation and the Corporate Policy Course Degree of Uniformity in Achievement Motivation Levels of Team Member: Its Effect on Team Performance in a Simulation Game Channel Conflict, Cooperation and Control: an Experiential Learning Exercise Differences in Experiential and Non-Experiential Learners' Reactions to Conflict between Individual and Organizations Behavior The Evolution and Evaluation of a Required, Senior-Level Course in Experiential Business Applications Building Management Skills through Problem Solving A Live-Case Approach to the Business and Society Course Experiential Learning: Toward the Development of a Theoretical Base and the Identification of Variables and the Hypotheses to Guide Research The Role of the Administrator in Experiential Learning and Simulations Some Thoughts on a Theory of the Use of Games and Experiential Exercises Three Applications of the Management of Learning Grid An Analysis of ABSEL: Its Past Achievements and Future Prospects New Horizons in Simulation Research Prediction of Academic Achievement in a Simulation Mode via Personality Constructs Sex Differences in a Bargaining Simulation COM-GAME: A Commodity Trading Game for Use in an Introductory Business Statistics Course A Financial Institution Management Game with Direct Participant Interactions A Non-Computerized Marketing Planning and Strategy Game Delphi in the Classroom: A Demonstration of Forecasting Economic Activity The Potential of Programmable Calculators for Processing Small Business Simulations Can a Small Predominantly Clack University Incorporate the Computer Simulation Gaming Teaching Methodology into it Curriculum Measuring the Effect of an Experiential Exercise Experiential Learning - Analysis of a Partial Success Predicting Participants' Performance and Reactions in an Experiential Learning Setting: An Empirical Investigation A Simplified, Non-Computerized Marketing Channels Game Manufacturers and Retailers: A Negotiation Game for Beginning Management Students Petroleum Management Game A Securities Dealer Simulator SIM ECO SOC with Business Curriculum Modules: A Simulation for Business Ethics and Morals The Picnic: A Perceptual Errors Exercise Salt III; an Experiential Exercise to Highlight the Interpersonal Dynamics Involved in the Negotiation Process Experiential Exercise on Values, Attitudes and Conflict Resolution in Organizational Behavior Kick'N Go: A Product Management and Social Responsibility Dilemma The Use of Self-Assessment Work-shops in a school of Business Administration The Dilemma of Self-Perception