Mike's Bikes Module Study Notes

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University of Waterloo
Accounting & Financial Management
AFM 131
Robert Sproule

Mike'sBikesModule Basics of the Game  Start the game selling one line and model of bike and by the end of the game selling three lines (mountain, youth and road) and three models (style, design or a combination of both)  Your company sells bikes to three types of distributors  Your company will be competing against up to 4 other teams in your section of the course in a World  Total demand for bikes in a World can change (hopefully increase) as the game progresses  Elements of strategy (strategic planning) - from overall to specific: mission, objectives or goals, strategy, and tactics  Should be an objective or goal for each of the functional areas: marketing, operations and finance Market Analysis  Trade-off in terms quality, advertising, extra support and deliver time, increasing cost versus increasing sales  Three different mediums for each of advertising and public relations o TV, internet, and magazines  Distributor sales revenue impacted by the number of bikes sold and the margin on each bike sold  Market Research Report provided to every firm in each World at the beginning of each year and should inform decisions for a given year  Each type of distributor sells a different percentage of each line of bike  There are a differing number of distributors by type with different logistics costs Mike's Bikes Players Manual Introduction and Overview  Shareholder value is determined by: current share price, plus the value of all past dividends paid (including interest earned on these dividends) o Share price is based on the earnings (profit) per share and the debt to equity ratio o The higher the debt to equity ratio, the higher the risk, the lower the share price  Decisions to be made at the start of the game include: retail price, advertising by medium, public relations by medium, sales unit forecast and production level (for one model of mountain bike).  Additional decisions as the game progresses include: branding, extra support by retailer type, margins by retailer, capacity, efficiency, quality, repayment of debt or additional borrowing, repurchase of shares or issuance of more shares, payment of dividends, abandon existing model of a bike line, and adding new model and or line of bike (mountain, youth or road)  The elements of strategic planning are: o Mission - fundamental purpose of a business o Situation analysis - how has your company performed and what does a SWOT analysis tell you o Objectives/goals - a desired outcome that should be: clear, specific, stated, ambitious but realistic, consistent with other objectives/goals, measureable, tied to a time period o Strategy - a broad plan of action for a given objective/goal o Tactic - specific decision for each strategy  For each year of the game you should: do a situation analysis through reviewing prior period results and market research reports, re-visit goals, strategies and tactics, enter your preliminary decisions, review expected results in the Forecast results reports, enter your final decisions Market Analysis The Industry  Western capitalist economy, population 12 million people  Consumers have high income and buy any bike that suits their needs  3 segments within market: low cost youth bike, mid-range mountain bike and high cost road bike  Government regulated market and restricted importing bikes  Local manufacturers produce mountain bike segment Your Firm  Hired as marketing manager to oversee single product o Will be promoted as VP and have control of production, finance and product development o Will later be promoted to CEO and be responsible for overseeing the planning, implementation and evaluation of firm’s strategic company plans  Company is leading firms in mountain bike industry o Operated by management team o Shareholders invested into your firm, providing it capital (cash)  Market research shows that consumers do not like mountain bike segment  Firm’s design team is developing new bike designs  Our job is to determine possible modifications to existing product or investment in new products Segment Overview  Three segment: road, mountain, and youth  In beginning, firm and competitors start with single mountain product, other two are empty Mountain bike segment  Consumer is typically young person, focused on fitness and outdoors  Wants a bike that goes anywhere and everything  Forego luxury features in a favour of a sturdy, high performance bike  Consumers would pay more for the right bike Road bike segment  Those who view cycling as a competitive activity  Typical racer owning at least two bikes  Products should be light, fast and leading edge  Consumers not as
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