Glob Strat TBL User-Guide PDF

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GlobStrat User Guide Business Strategy ! Corporate Strategy

Alliances & Partnerships

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Professor Daniel PAUL, Dauphine & HEC, Ph.D. in Management, MBA-ITP Harvard Business School.

GlobStrat_TBL User Guide -Web 3.0

Overview

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What is GlobStrat? ................................................................................................................ Your mission ......................................................................................................................... GlobStrat simulation flow and agenda .................................................................................. Your Right to Win .................................................................................................................. Your Industry ......................................................................................................................... Industry type ......................................................................................................................... Global Business Scope ......................................................................................................... Competition ........................................................................................................................... Intelligence Surveys .............................................................................................................. Global strategic Arena...........................................................................................................

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Strategy definition 6 Your values and goals........................................................................................................... 6 Industry structure .................................................................................................................. 6 Your Business strategy: creating value for your target audience .......................................... 6 Corporate strategy: developing new capabilities .................................................................. 7 Your management................................................................................................................. 8 Your Business Plan ............................................................................................................... 8 Economic Equation & Financing plan ................................................................................... 8 Share Value creation............................................................................................................. 9 Triple Bottom Line scorecard ................................................................................................ 9 Strategy Implementation 10 Simulation Agenda .............................................................................................................. Marketing ............................................................................................................................ Sales ................................................................................................................................... Customer Value per market segment ................................................................................. R & D .................................................................................................................................. Innovation ........................................................................................................................... Quality differentiation and ISO certification ......................................................................... Sustainability differentiation ................................................................................................ Your starting point ............................................................................................................... Production ........................................................................................................................... Production of semi-finished products .................................................................................. Assembling your finished products ..................................................................................... Human resources ................................................................................................................ Corporate social Responsibility (CSR)................................................................................ Finance ............................................................................................................................... Funding sources ................................................................................................................. Cash usage ......................................................................................................................... Financial rules ..................................................................................................................... Your starting point ............................................................................................................... P&L (Income Statement) ..................................................................................................... Balance sheet ..................................................................................................................... Your Starting situation ......................................................................................................... Decisions cheat-sheet.........................................................................................................

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GlobStrat_TBL User Guide -Web 3.0

Overview What is GlobStrat? GlobStrat is both a Business Game, for fun, and a Global Strategic Management simulation, for learning. The Business Game is built on a competition between teams engaged in a challenge: • You compete against firms ran by your peers, and the best company will emerge on top. • Your team intention will be a strong motivation, allowing for individual and team engagement . • The game allows you to run a company in a realistic, yet risk-free virtual environment, • This Game setting creates a learning by doing and learning with fun environment. Yet, the aim of the simulation is experiential learning. Based on corporate strategy practice and team-work: • GlobStrat simulation looks very much like the actual global competition going on between firms in the real world. • GlobStrat teamwork will train you to communicate & cooperate within your Executive Committee. GlobStrat is a strategic management training tool, aimed at: • Getting the understanding of strategy dynamics in a global competitive world. • Defining and implementing a successful business strategy, on the long-term. • Developing your ability to run a company, acquiring the CEO 360° perspective, • Experiencing team-work within an executive committee, improving you ability to cooperate with your peers. GlobStrat should demonstrate that a winning strategy is built on a few (yet difficult to obtain) fundamentals: • A clear definition of your business strategy, • A strong team engagement in its execution, • An alignment of every team member, and of all functions, in its implementation. • Coherence#should be the key-word explaining, in the final debriefing, the success… or failure of your strategy.

Your mission As a member of the executive team, your mission is to create value on a sustainable basis. Profit is obviously the foundation of sustainable business. Yet social and environmental impacts must also be managed to achieve true business sustainability. To that end, GlobStrat evaluates your company’s performance through an aggregate Value representing the value created for shareholders and stakeholders, based on a Triple Bottom Line scorecard including Profit, Planet and People.

GlobStrat simulation flow and agenda Your first step, having read carefully this manual, is to assemble your team and define your business strategy. We recommend consulting market surveys to better understand the trends of your industry and build your Business Plan in the proposed canvas, built on the «#Business Model Generation#» canvas. A «#practice round#» may end this preparation process. If that was the case (look at your simulation agenda in your Management tab), take advantage of this opportunity to learn how to use the software and test the first year implementation of your strategy. Note that during this practice round the competitors‘ data and intelligence surveys are not displayed, so that you can really test your own strategy, without any spying opportunity for competitors… You will then go through several simulation rounds, each representing one year of operation. For each round, the recommended method is to go through this decision-making process: • Analysis of your company’s and competitors’ performance (strategic diagnosis), • Decisions for each function and what-if analysis of your budgets (generated by Globstrat), • Coordination, adjustment and arbitrage of your decisions to fit within your strategy and your financial capacity, • Submission of your decisions, so that GlobStrat can compute the results for the year, given competitors’ decisions. At the end, you will have to prepare your Business Report and probably present it during the final debriefing. !

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GlobStrat_TBL User Guide -Web 3.0

Your Right to Win When starting, your firm does not have any true strategy: no identity, no original positioning (identical to competitors)… It is your team responsibility to give it a specific identity and, ideally, a unique strategy. Every business usually have a past, an history, a specific culture, a given strategy…Within GlobStrat this strategic identity is not given. You are free, to choose your own strategy. All competitors are in the same beginning situation: a generalist positioning on its domestic market, with the same resources and market share. The only difference is your domestic market. But the domestic markets look very much the same when starting. They may evolve differently in the future, but these trends are public and available in your Market intelligence survey. So you will be able to take them into account when analyzing your environment. In Globstrat, the governance (your board) is giving a «#carte blanche#» to the executive committee (your team), This may not seem very realistic, but from a pedagogical point of view it is very powerful, in terms of strategic freedom and teem empowerment. You may choose your strategy and engage strongly your team in its success… Take advantage of this situation in order to elaborate a potentially winning strategy, allowing your business to build on equal resources to develop a different, and may be unique, strategy, and to execute it better than your competitors. Your team work efficiency will make the difference!

The firm’s «#Right to Win#» is central to this strategic simulation. There is not any predefined winning strategy in Globstrat, no optimal way to success. What will make the difference looks very much like what Paul Leinwand & Cesare Mainardi, called «#the essential advantage*#», i.e. a strong coherence among the main elements of your Business model**: • A Value proposition and an adapted Portfolio of products & services associated to some value attributes and to the «#right#» price : your way to create value for your target customers. • A Value Architecture building your Capabilities System, i.e. your ability to deliver this value to your customers, to create some competitive advantage(s) and to generate an actual differentiation from your competitors. • A Profit equation, allowing your firm to finance its investments and generate a good Return on Capital employed. • A «#Fit#» in between all these elements, creating a synergy effect, through a «#Coherence Premium***"», allowing for a better Customer Value and higher Profits. Strategy definition and strategy execution are strongly related, so that what will finally make the difference (in the real world as in GlobStrat) is probably your ability to define and implement a clear and coherent strategy, engaging you, and your team, in the success of your Business strategy.! * Paul Leinwand & Cesare Mainardi, The essential advantage, Strategy&, Harvard Business Press, 2011. ** Re-Invent your Business Model, Laurence Lehmann-Ortega, Hélène Musikas, Jean Marc Schoettl, Odyssey314.com *** Paul Leinwand & Cesare Mainardi,The Coherence Premium, Strategy&, Harvard Business Review, july 2011. !

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GlobStrat_TBL User Guide -Web 3.0

Your Industry Industry type Your company operates in a high-tech industry, producing and selling tablets similar to iPads. This industry may be changing very fast, on a#»life cycle#» mode, from Emergence, Growth, Maturity, to Decline (or crisis). You start with one product: the T product. You can opt to innovate by developing up-to 3 new technologies: Storage (high capacity), Communication (4G), Image (High Definition), leading to 7 new products combining technologies: • First generation: the T product, sold 1 000 $ (for a bunch of products) • Second generation: three simple products (with one new technology): T-S, T-C, T-I • Third generation: three hybrid products (with two new technologies), T-SC, T-SI, T-CI • Fourth generation: one complex products (with three new technologies): T-SCI So markets’ life cycle, new technologies and new products, new entrants, new strategic positioning, more rivalry between competitors… are probably going to change this industry within the next years. Each new generation of products may be substituting to elder ones and take up to 50% of the preceding generation’s market share and then evolve accordingly to its own life cycle. Anticipating these evolutions and adapting your strategy to this changing environment will certainly be essential to your own success.

Global Business Scope GlobStrat is a global simulation, with three markets: Americas, EMEA (Europe-Middle East-Africa) and AsiaAustralia. You start as a domestic player on one of these markets, and , when this option is activated, you can opt to expand internationally and even become a global player. Your instructor may open this «#going international#» option from the beginning or delay it to later, depending on his own objectives and course timing. Each geographic area (market) is divided in three market segments with different characteristics: Consumers, Small Business and Enterprise. This creates a business scope of up-to 9 market segments and up-to 72 product-markets combinations, among which your team will have to make strategic choices. Your money is the $, for setting your prices and measuring your unit costs, but most GlobStrat figures (in your reports) will be stated in K: 1 K = 1 000 $.

Competition A GlobStrat simulation contains from 4 to 9 teams competing for market share, revenue, profitability and, last but not least, sustainability. Initially, competitors are distributed across 2 or 3 regions. Each competitor has an identical starting point, providing an equal chance of success. To that end, the 3 markets behave virtually identically, when starting. Market sizes are a function of the number of teams, so that each company starts with an identical market volume and share, regardless of the number of competitors on each market: the «competition» analysis will describe your competitors’ positioning, and tell you where your business is operating in Year 0: its domestic market. In addition, each region contains a set of Small Competitors modeled by the GlobStrat software. Small Competitors have no global ambitions and only act opportunistically, capitalizing on your inefficiencies. Your innovation ability should allow your company to progressively conquer their market shares.

Intelligence Surveys To develop a successful strategy you need to understand, anticipate and react to your environment - the markets and your competitors. GlobStrat contains a number of intelligence reports you can purchase for a 20 K fee (they are free in year 1). They concern every function : Marketing (Market survey), Sales, Production, R&D (innovation), HR, Finance.

Global strategic Arena When the business game begins, your company is identical to all your competitors. Success requires building strategic advantages, which implies differentiating your company from competitors. This of course is achieved through investing in selected areas, given your own strategy. GlobStrat provides, each team, a complete strategic freedom. your own values are welcome and may lead your firm goals. There are no pre-defined winning recipes. Instead, success requires being better than competitors. Easier said than done. To help your strategic thinking and definition, here are a few elements to consider." !

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GlobStrat_TBL User Guide -Web 3.0

Strategy definition Your values and goals Your strategic thinking step consists in defining the values shared by your executive committee, and the weighting of your economic (Growth, Customer Value), financial (Profit), environmental (Planet) and Social goals (People). Creating competitive advantages requires investments, time, and resources allocation.

Industry structure The first strategic challenge is to understand the industry in which you are competing. There are several frameworks for this analysis, such as the SWOT model or Porter’s Five Forces model. This should lead you to evaluate: • The market trends, through a market intelligence (market survey, free in year 1) • The segments’ key success factors (same Market survey) • The potential intensity of competitive rivalry, given your own scenario and your competitors’ one. • The threat of new competitors’ entry and the opportunity/threat of new technologies & new products launching.

Your Business strategy: creating value for your target audience The second strategic challenge is to differentiate your company. Starting from a generalist positioning on your domestic market, without any competitive advantage, will lead you to build one or many strategic advantage(s) on your target markets. But building a strong and sustainable leadership will take some time. So, we recommend using these non strategic markets (for you) as a source of revenues for financing your leadership elsewhere.

Choose a clear strategic direction! Customer Value" Differentiation!

Strategic innovation area Customer intimacy ? Stuck into the middle ? !

Progress ! Area! Cost-Volume! Strategies!

Effi

er" i t on Fr y nc cie

GlobStrat" Teams initial ! strategic positioning"

Low-cost! Non viable Area!

M. Porter ’s «"generic strategies"» choice, in STRATEGOR !

Cost" !

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GlobStrat_TBL User Guide -Web 3.0

Starting from a median positioning, without any strategic advantage, you can, and should, choose one generic strategy: remaining a Generalist, preferring a Customer Intimacy focus, specializing in Volume-Cost domination, or building a Premium Differentiation. Generalist: This is your initial positioning. Operating on the three segments of your domestic market, without any differentiation of you customer proposal from one market segment to another. Defending this positioning may be difficult, given the potential specialization of your...