1. Read the Player's Manual through for information only. This first time through don't try to work out a specific strategy or to make any particular decision. Instead, get a "feel" for the simulation, the Footwear industry, and the opportunities available for your firm.

2. Think about what you would like to do with a company in this industry. At this stage this should be a broad conceptual perspective of how you would like to compete. Do you want your product line broad-based or focused? Do you want to be high priced or popular priced? Do you want to be aggressive or conservative?

3. Read through the manual again in the light of the conceptualization you have developed. This time think about how decisions would be made consistent with your perspective. Don't attempt to put all of the specific numbers in at this time, rather, make notes of your general recommendations in each area.

4. Note how this simulation considers all teams' decisions in making determinations of some factors such as material costs and labor productivity. Note too how teams are rewarded or penalized for certain behaviors. Have your ideas and suggestions for competition ready for your first team meeting.

5. When you have a question: RTM (Read The Manual) first.

The first thing the group must agree on is the general strategy. Do this before you make ANY specific decisions. Take notes explaining your rationale as you will have to turn in a two page summary of your group's initial strategy with your first decision. The first two forms in Appendix B will be quite helpful at this time. Make sure you have your Mission, Objectives, and Strategies well thought out before you make specific decisions on wages, factory building, or advertising.

Once the above decisions have been worked out your group can make its specific decisions for Year 11. Make sure your decisions make sense and are consistent with the larger decisions you have made regarding your strategy.

Now you are ready to load your decisions onto your computer disk. Follow the installation instructions on the RUNNING THE GAME handout, and the operational instructions in Section 5 of the Player's Manual. They are quite straight forward.

Follow the menu through the decisions. You should have the following information for Year 11 decisions:

All other Costs and Rates are the same as the defaults on the screen. Do not change them or they will adversely affect your analysis.

Work your way through all of the screens. Check worker and shipment levels and analyze any changes in your financial position resulting from your decisions. You may also want to work out a five-year plan. Once you work out the full five years you will only have to update future five-year plans by adding one new "out" year. You can always change the "out" years. (Only the numbers which you put in for the current year (here year 11) will be read by the computer when you turn in your diskette.)

When forecasting demand remember that the size of the industry will depend on the number of teams in the simulation. The forecast numbers on page 45 of the Player's Manual are PER TEAM. Multiply these numbers by the number of teams in our class to obtain industry-wide estimates. In subsequent periods the Footwear Industry Report will provide industry-wide estimates.

Print out your decisions. You will want at least one copy for yourselves and the team will need to turn in one copy each week with your diskette.

As you exit the program the software will check for illegal entries. If one is found you will have to correct it before the final save can be completed. NOTE: The program DOES NOT check for "bonehead decisions", including leaving key entries blank. For example, if you fail to employ any sales personal you will make shoes and send them to your warehouses, but you will not sell any. Similarly, typos (e.g. typing in "1000" when you meant "100") in a decision may go through. This is why it is critical that you review your decision printout. You can always re-boot the program and change your entries prior to turning in the diskette. After a diskette is turned in the decision can not be altered. While your team can recover from bonehead errors over time, they can greatly disrupt your strategic plan.

Also note that printing out decisions does NOT SAVE decisions! Your entries may look good on the printout, but unless they have been saved on the disk, other data will be loaded as your decisions. After you have made all decisions, and saved them, log-out, log-in, load and print decision entries. Only then are you sure that the data on the disk is the data on the printout.

When all decisions are final, write up your initial two page strategy statement. This should present your overall strategy, the rationale behind it, and how you feel your decisions will help you accomplish these goals. At this point in the class, these are not expected to be very refined. Indeed, it is the benchmark against which future statements will be compared. It is hoped that over the course of the quarter your statements will become more sophisticated, as will the actual decisions, due to the things you learn in class and from the text. Therefore, you should do the best you can at this time and build/improve your strategy over the quarter.

The results of each "year" of competition are on your diskette. The diskette includes two items which you should print out and study before you enter your next decision years:

Question:

Why is the group’s strategy points high but the rating on financial indicators (e.g. stock price, ROE) low?

Question:

How come a group has a short term loan when it never took one out?

Question: 

How could our bond rating improve if we are had to take out a short term loan.

Question:

Teams may try to raise money by increasing their dividends, thus making the stock more appealing. Is this a reasonable strategy?

Question: 

                    Why is a 20 year bond rate used instead of the 10 year rate mentioned in the manual?

The company's capital investments depreciate at a 20 year rate, so theory suggests they should be financed with 20 year bonds.

Question:

                    Does the quality of goods in inventory affect this year’s demand?

Question: 

How come we are paying more in interest than another company even though we have less debt and a higher bond rating?

Question: 

Our projections were great, what happened? (Or why did we need a short-term loan when our projections indicated plenty of cash would be available?)

Question:

                    Where do we enter the S&P 500, exchange rates and the AAA bond rate?

Question: 

                    Why can’t I issue a bond ?

Question:

                    Does Automation enable me to produce more shoes?

                     NO! Automation options:

                                1) Reduce the number of workers needed (increased productivity per worker)

                                2) Reduce setup costs

                                3) Combination of both

                                Only Plant Expansions increase the number of shoes produced.

Question:

There is a discrepancy between Option C on p.24 of the manual (Plant Capacity and Automation Options) and Option C on p.53 (Automation Options). Which is correct?

The purpose of the game is to develop an effective competitive strategy in the wake of competitors' actions and a changing marketplace. In doing this firms may decide to issue new stock as part of their financial strategy. In fact, the use and timing of stock sales is an important part of firm growth strategy. However, in the BSG there is an un-real-world trait that produces the potential for abuse and does nothing for competitive strategy. As with predatory pricing, you may ask why a team would do something that has no effect on competitive strategy, and hence hurt their grade, particularly where it has no real-world application. Still, people do it so here is the rule.

The Instructor reserves the right to cancel or reduce all stock sales not tied to financial strategy that does not support an overall, long-term competitive strategy. Just selling stock to raise cash that will not be used, or just paid back as dividends, or used to buy back stock later is neither good financial nor competitive strategy. Indeed, it will often lower your ROE and have long term negative performance consequences.

Students should always remember that evaluation for grading is based on the richness and effectiveness of their firm's comprehensive competitive strategy. Loss of this focus will hurt your team's grade.

This separate memo must accompany your decisions in the year you wish to sell or buy-back stock. Failure to submit this report will lead to a fine of 10% of the stock issue valuation (or buy-back) and possible cancellation of the transaction.

The Bankruptcy Index Calculations accompany the Footwear Industry Reports. Any company in the BANKRUPT ZONE according to Altman’s Bankruptcy Index, is prohibited from bidding on any celebrities. Any company bidding on one or more celebrities while in the bankrupt zone will be fined $1 million the first time, $5 million the second time, and $10 million all subsequent offenses. In addition to the fine, the celebrity contract will be rescinded and for each violation five (5) points will be subtracted from your final BSG grade.

In addition, companies remaining in bankruptcy for more than two years will forfeit all of their celebrities. Consequently, these celebrities will once again become available for bid.

These situations generally do not develop until later in the game. If you feel you may be affected be sure to ask the instructor to review your pricing BEFORE decisions are due.

Predatory pricing is pricing below marginal cost with the intention of running a competitor out of business. It is a violation of the Clayton Act. Given that competitors cannot be run out of the BSG it may seem silly that one would not cover their marginal costs, but it happens so here is the BSG version of the rule:

You must cover all marginal costs for the market in which you are selling as listed in your firm’s Cost Report (example on p. 33).

To figure this for each market take the Production Cost Per Pair and subtract out Maintenance/Depreciation. Costs will be determined in the year sold. Exceptional years in sales (very high or very low) will be taken into account in determining the propriety of Marketing Expenses.

Exceptions:

You have a defense to pricing below current year's cost if you covered the prior year's reported costs AND ALL of the following conditions are met:

Private Label: No increase in high-quality materials, no increase in factory supervision, quality, or design expenses, no increase in wages or incentive pay; Branded: same as Private Label plus no increase in advertising, number of dealers, or dealer support.

Inventoried shoes may be sold at the lowest combination of the above for the prior three years or the number years found by dividing the inventory by the average sales in each region, which ever is LESS. Manipulations of inventory levels to alter average costs will not be acceptable in lowering costs.

You may sell inventory below marginal cost to exit a market. You must leave the market for the three years after the final sale of inventoried goods. You may not transfer in ANY shoes, from manufacturing or from another warehouse into the market during the close out sale.

Matching the PRIOR YEAR price of a competitor is always a defense to charges of Predatory Pricing. You can not be charged with predatory pricing if all you are doing is matching. However, if the original price cutter raises their price in a subsequent period, you must at least cover your costs or move to the new price in the next time period.

FINE: The Penalty for predatory pricing violations is the difference between the price charged and your calculated lowest cost, times the number of pairs sold at that price, trebled.

BACK-UP DISKS

Make a back-up copy of your disk IMMEDIATELY upon receiving it back!!!

VIRUSES

Viruses are widespread in the GSU computer labs. If you use the on-campus computers, sooner or later, you will become infected. Be sure to scan your disks before handing them to your instructor. The lab assistants can show you how to do this. They can also provide you with a copy of a virus scanning program called the "McAfee Virus Scan 95" (Win95), or "F-PROT" (DOS), which you can put on your machines at your office/home. If you hand in a disk with a virus, a $1 million fine will be levied. The second offense gets a $5 million fine. All subsequent offenses carry a $10 million fine. Be sure to scan your diskettes. If I get a diskette from your team with a virus (and can't remove it easily), I may be forced to use the previous year's decisions for your team's decisions. Practice safe computing.

LATE DISKS

The yearly results cannot be processed without all diskettes handed in on time. If you do not hand in your disk at the times announced by your instructor, your decisions from the previous year will be used and your team will be penalized $5 million. To avoid this problem, be sure everyone on your team has a back-up copy of the disk with the most recent decisions. This will assure that your team will not miss a deadline due to a member missing class.

GAME RATES

Your instructor will inform you which rates will be used for each decision. The Wall Street Journal is the best source for this information.

LABELING DISKETTES

On each diskette, put your instructor's name, your industry number, your team name, and the names and phone numbers of each team member. I may need to call you if you have a virus problem or if your diskette fails. Suggestion: make multiple back-up copies of your diskette, using different disks for different years. This procedure allows you to access data from previous years.

DECISION REPORT

With each decision, you must hand in the two-page decision report. (Decision Printout for Year ___ see attached). Failure to do so will result in a $1 million fine. I need these in the event your disk fails. This will allow me to create a new disk and enter your new decisions from the hard copy. DO NOT hand in the multi-page spread sheets.

There is no substitute for carefully reading the manual. Most of the answers to your questions are going to be found there. When I get asked questions, I immediately refer to my manual, which is exactly like yours.