Friday, 12 October 2012

Business Strategy Game Guide – How to Run a Business Part 2

In the last article we discussed to not be overaggressive especially in the early years. So when is it good to be overaggressive and wield absolute power against your competitors.

Time has mellowed me out from my younger days, and I can now safely say it is not good to be overaggressive. My early companies that were able bankrupt other competitors were not themselves innately rich on the grand scale, although they simply had the most money. Channel your focus towards your company and less emphasis on wanting other people to drop.

A company I am overseeing is extremely successful. They have about 150k in net profit in only year 14, an absurdly early time to be getting that level of a net profit. They are part of the top 25 for the week. They are extraordinarily wealthy and hold great influence over the industry.

The company has 100k in cash, this now sets the tone for one of the happiest questions a company needs to ask itself. What do we spend our money?

A company that is absurdly rich can expand their factories, be overaggressive, begin wielding it’s absolute power to bankrupting other companies. I have done this in the past, but are the long term effects of being overaggressive good? No one has started a war against us yet, why rock the boat?

Instead of expanding unnecessarily for the mere pleasure of bankrupting others. My choice strategy is to pay off debt. We will expand in sequence with the industry, but if there is no need to expand, let’s pay off debt so if in the event bad times come. We will have deep pockets and a high credit rating to summon resources from.

As well not being overaggressive keeps the balance of power from falling through, therefore we can hopefully maintain our profitable standing for a few more years. As well if someone else creates a price war, the perception would be we were defending our market share, and all that we do is in self defense.
There you have it, pay your debts down, and don’t be overaggressive in expanding. If you expand too much, and the industry falls through in a recession, and you have all the debt built up from wild spending during the good days. You have created yourself a situation to lose if anyone smart takes advantage of it.
Ultimately it is safer to not be overzealous in running business, don’t spend frivolously, bank away cash and be conservative making smart expansion decisions that are in relation with the industry. That’s true business strategy.


The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game
For more Business Strategy Game Help that teaches how to Win Business Strategy Game and The Glo-Bus Simulation Game go to www.bsgtips.com Business Strategy Game

Business Strategy Game Guide – How to Run a Business – Part 1

There are 2 ways to run a business. The right way and the wrong way. As a grand champion who has played the Business Strategy Game for 4 years, my early years were extremely aggressive. By the second time I played BSG, I made 3 people outright fail the course, 5 people fail BSG, and about 3 others barely pass. I was a shrewd thinker, and I wanted to dominate other companies.

But as my hostile tactics became more and more known, I began to receive the reputation of being merciless and how I’d simply be the greatest of a bankrupt industry without having a lot of money myself. I fundamentally changed my strategies on how I’d wield absolute power in an industry, and while I’d dominate, I would channel more energy inwards to making myself greater, than outwards trying to make other companies go bankrupt.

For anyone who researches BSG on the internet comes across the Corvallis “How To Win BSG Online.” This site is managed by a handful of Industry Champions who hope to educate new players on the game. While most of their content is respectable, one has to remember that the information is coming from Industry Champions, who at best have seen a few companies, and at worst have only played and won their game once.

I have played BSG rounds hundreds of time now and have seen a plethora of circumstances as a grand champion. One of Corvallis’s big sayings is “expand, expand, expand”. Now there is a grain of salt to this this mindset. A winning company usually is the biggest, but unbridled expansion is not how you win. That is far too simplistic of a winning idea, which may suffice from an industry champion, but not a grand champion.
A company I’ve seen had a strategy of “playing big, to win big”. The foundation to this strategy is Corvallis’s motto “expand, expand, expand”. The first few years the company did “all right”, but as time went on, the company started to lose it’s glory. Amongst the several circumstances surrounding the company, such as a recession, the main reason why this company fell was because they took on far too much debt without sufficient revenues. By the mid game, they were crippled by the amount of debt they took on and the best we could do is simply contain their situation. There is no immediate cure for 400k in debt during a recession.
This company played far too aggressively, spent money before they earned it, and ultimately fell because of it. To think of the strategy “play big, to win big”. That isn’t really strategy at all. That is what is called GAMBLING, and in his circumstance he lost the bet. Try not to spend lots of money in your business if you’re having trouble getting a dime in.

Do not overload yourself with debt trying to reach for the stars. Every company has aspirations to win when they start the game. Pace yourself, grow in sequence with the industry. But to think that overloading yourself with all this debt and everything is going to be OK is not the way to run business. I liken the circumstance to “if you eat too much sugar when you are young, you’ll get diabetes when you’re old”. In BSG it is “take on too much debt in your early years, you’ll pay for it dearly when your company matures when it can’t handle it.

So now we know not to be overly aggressive, especially when you have not set the foundation of your company. But is wise to be all out aggressive even if your company is doing extremely well? Read Part 2 to find out.

The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game
For more Business Strategy Game Help that teaches how to Win Business Strategy Game and The Glo-Bus Simulation Game go to www.bsgtips.com

BSG Game Tips – Price Elasticity

An in depth analysis can be done on a Business Strategy Game company regarding price elasticity. There is usually a $5 price spread where the demand for shoes will not experience a significant change. I’ve seen many companies plot the price vs the demand and see where the price elasticity range is. Of course though being on the upper end of the price range is usually the most profitable and should be sought after to attain. But what are the effects of price elasticity if you are go below or above the range?

If you go above the range, demand will start to be noticeably lower. In some rare cases where supply isn’t enough to meet demand, this would prove to be more profitable. This is because prices must go up if there isn’t enough supply to meet demand.

If you go below the range, demand will rise exponentially, which is a key way to maintain market share. In very common circumstances where there is a recession with an oversupply of shoes for the demand, stealing other company’s market share is a way of survival.

Although the price of your shoe does have affect on the industry, the great industry trends won’t usually be affected by what you decide I’ve seen companies fret they have gone below or above the price elasticity range and are concerned of what negative effects can occur by going against the norm. These negative effects include diminished market share with increased prices, or a furthered recession with decreased prices.

In essence, every year a new price elasticity range will be created due to the collective industry forces that control the market. While one company does have input to the industry average of prices, it is because there are usually several other competitors that creates a situation that no one really can control. Therefore it is best to play each year with the best decision set, as price elasticity is constantly changing.

The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game
For more Business Strategy Game Help that teaches how to Win Business Strategy Game and The Glo-Bus Simulation Game go to www.bsgtips.com

BSG Online Help – Cash Flow

The lifeblood of any company is the cash flow that exists between costs and profits. In the Business Strategy Game cash flow is something that must be carefully watched and prepared for. Being too short on cash runs the risk of going into overdraft and paying a premium interest charge. Too much cash flow is a waste of a valuable resource within the game that should either be paying off debts, building capacity, issuing dividends, etc.

In the many years that I’ve played BSG, the recurring number that seems to be a good ending cash balance is about $20,000. This provides for a hefty cushion in case the worse comes to pass. For companies that are extremely large and vast in size, I may increase the ending cash balance to be more around 35,000. There is one element in the whole game that is incredibly risky and can make it appear that your cash balance is very high, but in reality it is not 100% reliable. I am talking about the private label market.

It is possible to be defeated in a private label market incurring substantial costs and thus lowering your net profit and subsequently your cash account. The only way to reliably know where your cash balance will be in the worst case scenario is unclick all the PL markets to see where the company would be without PL revenues. This ending balance should be about $15,000- $25,000 depending on the size of the company.
Acknowledging the worst kind of situation that could befall a BSG company allows a shrewd manager to brace themselves for an unexpected surprise. Following this rule will prevent your company from going into overdraft and all the avoidable costs associated with it.

The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game
For more Business Strategy Game Help that teaches how to Win Business Strategy Game and The Glo-Bus Simulation Game go to www.bsgtips.com

BSG Online Simulation Tips – The JIT Decision

If you’re a business student like me you’ve probably heard of the wonderful JIT (Just In Time) systems that exist in the world. Even the mention of a JIT system brings about the concept of an extremely efficient and highly profitable supply chain. It is no wonder that most people who play Business Strategy Game or BSG think that implementing a JIT system in the game would greatly improve their chances to win.

The game’s shipping methods runs between 1-4 week delivery times. Hence 1 week delivery times represent the theoretical JIT systems that product arrives quickly and in a very timely fashion. It’s slower counterpart is the 4 week delivery time which is so the exact opposite of JIT. Most people just jump at the thought of implementing a JIT system, but there is something that most people don’t understand. Shorter delivery times require more inventory to “front” the supply chain which leads to a superficial inventory requirement to float the game’s logistics.

The question of implementing a Just in Time system becomes even more precarious when the minimum inventory requirement is actually greater than the demand shorter delivery times generates. If this is the case, then a JIT system is actually a money loser. All the shoes caught up in the supply chain at the end of the year become part of next year’s beginning inventory and their quality takes a small decrease as well as there are increased storage costs to pay off.

Ultimately a company must look at their distribution screen to fully understand if implementing a JIT system is truly worth the cost or if maybe they should choose a slightly slower delivery time despite the fact it goes against the high street opinion of JIT being the pinnacle of perfection.

The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game
For more Business Strategy Game Help that teaches how to Win Business Strategy Game and The Glo-Bus Simulation Game go to www.bsgtips.com

BSG Online Game – Riding the Tide With Exchange Rates

A totally uncontrolled area of the business strategy game is exchange rates. They are punishing and extremely beneficial to the whole industry. Understanding exchange rates is the equivalent of taking advantage of the winds at sea in the sense that they are totally uncontrollable, but can be “tamed”. Here’s a fictitious set of exchange rates, remember all Business Strategy Game or BSG companies work in American dollars at the end of the day.

* EA 0.9 per American dollar (-10%)
* Asia 1.10 per American dollar (+10%)
* LA 1 per American dollar (therefore it’s even.)

Taking into account that shipping international simply costs more through tariffs and shipping charges, the fact of the matter is revenues in Europe lose value through the exchange rate by 10%, Asia increases revenue by 10% and LA does nothing either way.

Selling in Europe is comparatively less profitable than Asia due to exchange rates so therefore it’s important to have emphasis in selling products in Asia as far as revenues are concerned. But exchange rates also change production costs, so therefore it is 10% cheaper to produce shoes in EA and 10% more expensive to produce shoes in Asia. For companies who have a big Asian plant will be hit hard, and during this year, it actually pays to make shoes cheaply in Europe.

Therefore the big picture is Europe will have less profitable revenues this year, but it will be cheaper to produce shoes there, and Asia will be more profitable to sell shoes this year, but it will be more expensive to produce in that region. Understanding this simple concept and planning accordingly due to the 4 currencies and how they interact with each other, allows you the unique ability to “control the winds” of BSG.

The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game
For more Business Strategy Game Help that teaches how to Win Business Strategy Game and The Glo-Bus Simulation Game go to www.bsgtips.com


BSG Online Tips – Know Your Competition

When I first played the Business Strategy GameI was intimidated by the amount of numbers and I didn’t feel I would ever be able to master the game. I talked to a lot of my friends who expressed the same sentiment, but in different ways. Ultimately as I rose the ranks of BSG by winning the business strategy game, I began to realize a trend of the “typical” individual who would usually win the business strategy game.
The individual may have an academic background, hard working, analytical, skills such as creativity are a plus, but being an individual who deeply analyzes and is very motivated to win the game acts as one of the most common recurrent themes in top BSG players.

The second characteristic that is typical of a high ranking BSG player is a competitive or gaming component. Those who play lots of video games (usually RTSs or Real time Strategy) have the background understanding of how games work and what to look for to win it. Someone who is labeled as a “gamer” in a business class, but not someone extremely academic, is someone who can potentially do very well in BSG.
And as unfair or prejudice as the last component is, is that someone who does very well in BSG is a male. Very, very rarely are there high ranking female BSG players, one only has to look at the Hall of Fame and find feminine names as Grand Champions. And the very few who are, are they in groups, potentially with a guy? It is extremely rare to find a lone female as a Grand Champion of BSG, although there are several male counterparts.

It is good to look at your class and see “is that someone who fits the profile of a good BSG player, they may be academic, but do they understand “games” or if they play lots of games are they smart enough to lend that skill to something academic like the business strategy game. And of course it is important to realize where you fit in the typical profile of the business strategy game. For those of you who are female and probably don’t play games, you need to really utilize your high academic motivation to win you the game.

A joke I have for other males who are struggling in an industry who describe to me their class. Whenever it comes to that pretty blond girl, you can almost bet she isn’t going to make it in BSG by herself. That guy who is specializing in IT and knows how to take apart computers…. that’s the guy to watch out for.
The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game

The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game
For more Business Strategy Game Help that teaches how to Win Business Strategy Game and The Glo-Bus Simulation Game go to www.bsgtips.com