copyright, 2000south-western college publishing a game of strategy in a global industry

Copyright, 2000 South-Western College Publishing

A Game of Strategy in a Global Industry


The Global Business Game’s Elements

Industry Countries Products Distribution Channels Pricing Sales Promotion Sales Offices

Product Differentiation Production Raw Materials Finance Foreign Currencies Strategic Alliances Special Actions


The Television Set Industry

A truly global industry with great product standardization.

Basically a capital-intensive industry with components being sold as commodities.

The product is a prized home appliance. Product saturation is complete in the more

advanced economies. Product reliability an important

determinant of a brand’s long-term demand.


United States

The world’s single, largest market. Relatively low population growth and a

saturated television set market. Prefers larger-sized, medium quality sets. Requires large marketing expenses to

reach market. Relatively high labor costs but also has

high per capita income levels.


Mexico

Possesses a relatively inexpensive labor force within NAFTA.

United States is its major export market. Has had a relatively high inflation rate. The country’s real GDP growth will be

very high although population gains will result in low per-capita incomes.


Germany

A wealthy nation with high labor costs within the European Union.

Dominates the European Union and the euro’s value. Prefers smaller, high quality TV sets. Low population growth with annual TV set sales of about 7.5

million. GDP should grow about 5.5% a year.


Spain

Has suffered high unemployment for a number of years.

A low-growth country. A relatively unsaturated television set

market. Set sales should amount to about 2.3

million a year.


Taiwan

Has a well-disciplined and well-trained labor force.

Economically stable. Friendly towards foreign manufacturing

operations. TV set sales should amount to about 1.2 million a

year with generally high growth.


Thailand

A relatively poor country with the lowest labor costs within APEC.

Labor force somewhat undisciplined. Low domestic demand for smaller, low quality

sets. High inflation rate and with high interest costs. Politically and economically unstable.


Products

25” and 27” television sets. Wholesalers carry your company’s own national brand for

retail re-selling. Can obtain bids for contracts to sell private-branded sets

to the Home Electronics King retail chain.


Distribution Channels

From the factory’s Distribution Center. Via Independent Wholesalers. Via Company-Owned Wholesalers. Direct to Home Electronics King, Inc.


Shipping

Slow, relatively inexpensive Surface. XAir, fast air express. Contract orders will not be filled unless allocated.


Pricing

Manufacturer’s Suggested Retail Price (MSRP) versus “Street Price” or Actual Price.

Reported Actual Price one quarter late. Actual Price usually discounted from MSRP. Products somewhat price insensitive due to sales

promotion efforts, brand name recognition and customer loyalty.


Sales Promotion

Sales Representatives engage in personal selling efforts. Non-personal sales promotion through trade and

consumer newspaper advertising. Product sales commissions a strong motivator. Sales Representatives may quit if their income falls below

reasonable expectations.


Sales Offices

Sales Representatives work out of Sales Offices.

All orders handled at the Sales Office level.

All Trainees receive field training in their assigned Sales Office.

Each Distribution Center has a Sales Office.

Free-standing, independent Sales Offices can be added for greater customer service.


Product Differentiation

Tells customers the product is different by “shouting” through heavy advertising.

Makes products more reliable through Quality Control efforts and better raw materials.

Provides customers with meaningful product improvements through patented R&D efforts.

Patents can be purchased from other firms.


Production Assembly lines can operate for two shifts plus Saturday

overtime. Workers assigned to 25” and 27” sets. Higher-skilled 27” workers make their own sets and 25” TVs if

assigned. 25” set workers can only make their own sets. Automatons increase the plant’s output and are very reliable. All plant and equipment must be maintained or it breaks down.


Raw Materials Two types of subassemblies are required

to make a complete set. Subassemblies must be ordered one

quarter in advance. Different grades of subassemblies are

available. Their mix is a heavy contributor to product quality.

Subassemblies purchased in 100 unit lots.


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


Foreign Currencies

Transactions in national currencies. Exchange rates may fluctuate over time. Foreign sales and costs automatically converted to Home Country’s currency.


Strategic Alliances

“Partnerships” or strategic alliances can be formed.

Sell or buy used Automatons. Manufacture sets for your competitors as a

subcontractor. Purchase Patents or license a Patent.


Surprises and Special Actions

Anything can happen… labor strikes, subassembly price increases, sales reps quitting, interest rate changes, bankruptcies and company reorganizations.

Critical Incidents in Strategic Management.

Merlin Group Ltd. Reports. Administrator’s Fines, Penalties and

Credits.

copyright, 2000south-western college publishing a game of strategy in a global industry

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