GlobStrat User Guide

Strategy
Definition

Strategy Strategy
Execution Team Evaluation
work

Daniel PAUL, Ph.D. in Management, MBA-ITP Harvard Business School

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Table of Contents
Overview 3

What is GlobStrat? .................................................................................................................3

Your mission ..........................................................................................................................3
GlobStrat simulation flow and agenda ....................................................................................3
Your Right to Win ...................................................................................................................4
Your Industry ..........................................................................................................................5

Strategy definition 6

Your values and goals ............................................................................................................6

Industry structure ...................................................................................................................6
Your Business strategy: creating value for your target audience .............................................6
Your corporate strategy: developing new capabilities .............................................................7
Your management..................................................................................................................8
Your Business Model .............................................................................................................8
Your Share Value ..................................................................................................................11

Strategy Implementation 12

Marketing.............................................................................................................................13
Sales ...................................................................................................................................14
R & D ...................................................................................................................................15
Production ...........................................................................................................................16
Human resources ................................................................................................................17
Finance ................................................................................................................................18
P&L (Income Statement) ......................................................................................................19
Balance sheet ......................................................................................................................19

The agenda of your simulation 20

Appendix 1 : GlobStrat available options ..............................................................................21

Appendix 2 : Decisions cheat-sheet .....................................................................................22
Appendix 2 : Detailed Profit & Loss Statement .....................................................................23
Appendix 3: GlobStrat Introductory Course (Videos and other resources) ............................24
Appendix 4: Our recommendations to redefine your business model ...................................25
Appendix 5: Tips for Implementing Your strategy .................................................................26
Appendix 6: Pricing Policy (setting your sales prices in GlobStrat) ........................................27

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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 « willing to win » 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 practicing 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 communication & cooperation within your Executive Committee.

GlobStrat is a strategic management training tool, aiming 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, on a Triple Bottom Line basis: Profit, People
and Planet.

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
Model in the proposed canvas, built on the « Business Model Generation » canvas.
Videos & Tutorials are available on line (on YouTube): consult the list and the URLs in the last exhibit.
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 to present it during the final debriefing.

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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 analysing 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 3 main elements of your
Business model, creating a « Coherence Premium*** », allowing for a better Customer Value and higher Profits:

• 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.

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, [Link]
*** Paul Leinwand & Cesare Mainardi, The Coherence Premium, Strategy&, Harvard Business Review, July 2011.

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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 = S, Communication = C, Image = I, leading to 7 new products combining these 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.

Business Scope
GlobStrat is a global simulation, with three markets: Americas, EMEA (Europe-Middle East-Africa) and Asia-
Australia. 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 equal volumes but 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 the 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 modelled by the GlobStrat software. Small Competitors
have no global ambitions and only act opportunistically, capitalising 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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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 and social goals.
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, shown in appendix 2)
• 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 Not
leaving any current market too quickly, 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 ? n tie
r
o
y Fr
Progress ! ie nc
c
Area! Effi

Cost-Volume!
Strategies! GlobStrat
Teams initial
strategic positioning

Low-cost!
Non viable Area!

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

Cost
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Starting from a median positioning, without any strategic advantage, you can, and should, choose one generic
strategy: remaining a Generalist, preferring a Customer Intimacy focalisation, 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 specialisation of your competitors, and the new entry of international competitors trying to conquer your
market share. Building strong Barriers to Entry may not be efficient enough to contain all of them and will probably be
very costly: sales agencies, competitive prices, new products covering the whole range of innovation.…The risk of
falling into the median positioning trap is high, but may perhaps be managed if you can find the necessary resources.

Cost / Volume domination: High volume - Low cost

This cost / Volume domination strategy involves winning market share by appealing to price-sensitive customers. This
is achieved by having the lowest prices in the target market segment. To succeed, your company must be able to
operate at a lower cost than your competitors. This simultaneously requires achieving economies of scale through high
volumes, driving down your costs and improving environmental efficiency.

Customer intimacy: focusing on specific segments

This segmentation strategy involves focusing on the unique expectations of target market segments, and customizing
your products, services and distribution to optimally serve a selected audience. If targeting multiple market segments,
your will need to customise your offer differently for each target audience. This can be achieved by new services
adapted to each market segment, but you will have, first, to develop these new service capabilities, and then, to
deliver them to your customer.

Premium leadership: differentiating your offer

This differentiation strategy involves offering customers with the best product offering, through product innovation,
quality and ecological certifications. Innovation implies R&D investments to develop new technologies & products;
Quality is a transversal activity (R&D, Production, HR) which can even be rewarded by ISO 9000 certification. Ecology
is also a transversal activity which can even be rewarded through ISO 14000 certification.

Your corporate strategy: developing new capabilities

Whatever your Business strategy, you will have to build the required strategic capabilities: innovation capabilities,
and international capabilities, setting the scope of your business: domestic, international or global.

Innovation strategy
The third strategic challenge is to define your innovation strategy. As you operate in a high-tech industry, innovation
is essential. You will need to decide which technologies to develop, and in which time frame. You will also need to
decide on the depth & breadth of your product portfolio. And wether your company is a leader or a follower.
The contents and intensity of your innovation strategy can make a substantial difference. A new product may help you
conquer more market share, but a new product is also a substitute to an older product. And don’t forget that new
services and ISO certifications may help too. You will have to allocate your resources!

Scope of business
The fourth strategic challenge is to define the scope of your business. There are 3 markets, 3 segments, leading to
9 market segments. You start as a domestic player operating in all 3 segments. You need to decide wether you want
to become a global player, operating on two or more markets. Likewise, you need to decide if you want to be a
generalist, operating on all segments, or a specialist operating on selected segments. Again this will take time and
resources that you may have to [Link] your strategy, DO NOT disinvest to quickly, from a given market
segment, even if it’s not essential to your strategy: you will need its resources for financing your development
elsewhere, and offering your market share to competitors would strengthen them too easily. This kind of strategy
divestment should be implemented on several years, time for you to grow on your customer targets…

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Your management

Your management on-line tools will help you to perform some tasks, such as:
• Defining the name of your corporation (A…, B…., C….): the first letter is given, but you may add 5 others.
• Organising your executive committee (team): one CEO, 5 Functional Vice-Presidents, up to 2 functions per VP.
• Defining your Business Model (before the end of year 1), for your archives and your instructor information.
• Look at your past records: Practice round results + yearly decisions, forecasts & performances (Management tab).
• Access to the Agenda of your simulation (Management tab).
• Access to your Peer Review team efficiency evaluation, at the end of the simulation and get the team members
feedback on your team efficiency.
• Access to your instructor’ debriefing graphs and explanations, after its presentation (Management tab).

Your Business Model

The proposed Business Plan, integrated in GlobStrat’s Management tools will take you through a series of questions &
optional answers, relying mainly on the Business Model canvas. It is designed in order to help you define your 3 years‘
sales objectives and allocate your main resources… aiming at defining a clear business strategy.

GlobStrat Business Model Synthesis!

Value architecture! Value Proposition
Key Partners ! Key Customer Customer! Customer
! Capabilities! Proposal Relations! targets"
Suppliers !
Agencies
Innovation! Salesmen Markets!
Production! Products Range
! Brand Advertising
!
Distribution! Market
Price Corporate Reputation
segments !
! Key Distribution
Quality !
Partners Resources! channels Consumers,
Services
Stakeholders! Finances! Large distribution, SMB,
Dealers,
! Certifications B2B,
Human Ecommerce Entreprises!
Resources! Reputation

Economic Equation!
Growth, Revenues, Cost Structure

Capital invested, Return on capital employed (ROCE)!

«Business Model Generation» A. Osterwalder et Y. Pigneur

The definition of a clear, sound and coherent business strategy is obviously a first step and a key factor of
success, even if, finally, its implementation will probably make the main difference.
Defining the coherency between the 3 main elements of you Business Model will be the second step of your
strategic thinking. Concretely, you will have to set:

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1. Your Value Proposition to your target customers:

Choosing your middle to long-term main customers’ target is essential and a first choice: how could you define
your best Value Proposal without targeting the customers for whom it is being built? But be aware of the fact that
this choice does not mean abandoning any market where you are operating when starting as a generalist on your
domestic market. It means allocating you resources in order to become a leader on one or two market segments
while exploiting the other(s) one(s) to generate revenues and profits financing your growth elsewhere.
Defining the content of your Value Proposition, that will create value for these customer targets (given the market
survey available in your Market Intelligence tab), will be the second step of this strategic decision process:
• Product range (innovation: which new products?)
• Price positioning (low, medium, premium?),
• Products’ Quality & differentiating Certifications,
• Customer intimacy (Sales Agencies coverage),
• Services included in your offer (and in your price),
• Brand Reputation (Advertising & Corporate Social Responsibility).

2. Your value Architecture:

Investing in differentiating capabilities that will build sustainable competitive advantages (if your competitors
are not doing the same choices, in the same time) may follow three main Value Creation processes. Combining
them in a unique way that your competitors will have difficulties to copy, is the main target of this strategic thinking
step, and the second main element of your Business Model.

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3. Your Economic Equation: creating the revenues and mobilising the ressources needed for financing you business
and the investments required to build your Value Architecture and create the Value corresponding to your long-term
goals : Profit, People & Planet… are your main challenge, from this economic and social point of view.

Concretely, each year you will have to balance two main financial balances : long-term & short-term.

Your main annual challenge will be the financing of the investments required to implement your strategy. Most
investments are substantial, and you have a limited long-term financing capacity, as shown in the slide below. But be
aware of the fact that you won’t be able to do it all and that you will need to allocate your resources and probably to
make tough choices.
The software will help you, via the forecasting tool, through the computed financing plan, to make the necessary
investment adjustments and arbitrages allowing you to validate your decisions each year: you must balance your
investment amounts (left column) and the available financing resources (right column).

The financing of your operations will probably be easier to balance. Your annual expenses may be financed through
your available starting cash (shown in your previous year balance sheet, as the ending cash) plus the revenues of the
current year, given your working capital requirement (WCR = accounts receivable (current asset) + inventory (current
assets) - accounts payable (current liability)). In order to balance this operational (short-term) financing need you can
ask for a bank short-term loan (limited to 5 % of your previous annual revenues). A provisional bank overdraft will not
be accepted, but, of course, in your actual results (if your revenues were lower than expected) you could be ending
with such a (very costly) overdraft. You may also lower your customers’ paiement delays but not renegotiate your
suppliers ones (2 months).
Each year, you will be accountable for your annual profit and cash position, and for your Profitability, measured in
terms of ROCE : Return On Capital Employed.

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Your Share Value

Each year, GlobStrat assesses the Value you created and computes a Share Value, aggregating 4 perspectives:
• Economic value (Customers perspective); market share, revenue growth, sales forecast accuracy,
• Financial value (Investors perspective): profitability, ROCE, debt ratio,
• Governance value (Shareholders perspective): profit per share, dividends per share, capital dilution,
• Social value (Stakeholders perspective): CSR index and environmental value (ISO 14000)

This Share value will be displayed, each year, in your « Competition » tab, comparing your Performance with your
competitors ‘ones.
The components of this value will be displayed in your Customer Value Intelligence tab, measuring each dimension
contribution to creating share value and comparing its structure to the global leader ’s one.

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Strategy Implementation

The preceding chapters of GlobStrat were mainly an introduction to your executive committee integrative, global and
strategic responsibility, driving your business strategy definition. But a strategy is not only an intent. It has to be
implemented over time in order to generate an actual performance, i.e generate a superior return on the long-term.
The final debriefing will give each team the opportunity to explain its strategy and evaluate its performance.
But, from strategy definition to strategy evaluation, the fundamental step is: strategy execution, through five
functions and many transversal processes coordinating your decisions. As a matter of fact, over the years, in
GlobStrat, we observed a strong correlation between team work efficiency and company performance: a clearly
articulated strategy is paramount to success. Yet, implementation seems even more important than the strategy itself.
The explanation is simple: to generate high performance, a strategy must be clear and coherent, but also coherently
implemented through yearly decisions, managed by the team members. Your team work organisation, decision
process, working method, communication between members, coordination and arbitrage processes…will be essential.

This implementation process will train participants to:

• Understand that strategy definition and strategy execution are the two faces of the same coin,
• Decline the business strategy (integrative & global) into complementary functional policies & roles,
• Experience how to coordinate these functions, in order to create a potential synergistic coherence premium,
• Understand the secrets of strategy execution: information flows, decision rights + coordination & arbitrage,
• Organise the team work & elaborate a decision method leading to efficiency & coherence,
• Learn that team work efficiency is not synonymous with collegiality but must be organized and facilitated,
• Understand how leadership (CEO or facilitator) may contribute to this team coherence and efficiency.

Simulation Agenda
We thus encourage you to actively contribute to the efficiency of your team. This will include:
• Clearly defining your roles, in the Management tab of the software menu & download your Mission Letter (Docs),
• Defining a decision methodology - analysis, strategic diagnosis, functional decisions, arbitrage and closing,
• Designating a CEO or a facilitator to promote productive team-work and enforce the chosen decision methodology,
• Practicing active listening, to best understand other’s opinions and benefit from their experience, or ideas,
• Putting forth your opinions, even dissenting opinions, yet in a constructive, ethical and responsible way.

Be aware of the fact that you will get an access to decisions corresponding to your function, only after having chosen
this function and only within the timing allowed by the instructor (decisions beginning-ending time), time displayed in
the bottom line of your screen. You won’t be able to change your colleagues’ decisions but you can view them.
• The simulation schedule is displayed in your Management tab. This schedule is defined by your instructor and may
incorporate a practice round, or not, and usually around 5 to 6 decision rounds.
• Round 0: organisation, strategic thinking, Business Plan…and quiz 1 (based on your understanding of this manual),
• Practice round: take advantage of this round to practice the software and test your first year decisions. Its results will
be available in the Management tab allowing you to adjust your year 1 decisions, without any possible spying,
• Rounds 1 to X: take advantage of your Competition benchmarking tab (+ paying Intelligence surveys) to enrich your
decisions. Use the forecast computing capacity of GlobStrat, to find the best financing plan for your investments.
• Each year, the CEO will have to submit your set of decisions, on time. This set must be respecting not only the
Globstrat financing rules (LT financing resources allowed + an eventual adjustment by a limited but highly dilutive
Capital Risk financing) … but also the international commerce laws ( NOT any collusion between competitors) and
usual ethical charts (your University’s one specially). Penalties will be applied in front of any unethical behavior.
• At the end of the simulation, you will have to go through another quiz evaluating your ability to run a strategic
diagnosis on two GlobStrat mini-cases, and to evaluate your own team-work within a Peer Review tool,
• Prepare the final debriefing: elaborate and present your final business report, facilitated by and concluded by your
instructor’s final presentation, comparing your strategies and explaining the reasons of teams’ successes or failures.

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Marketing
The Marketing responsibility consists in creating the best conditions for successful sales. This is achieved by building
your Market Reputation, Customer Value, and Sales Capacity:
• Market reputation reflects the consumers' knowledge of your brand. It results from your advertising efforts, market
by market, but also from your corporate reputation: environmental efforts and CSR recognition.
• Customer Value reflects the customer desire to buy your products instead of those of your competitors on a
specific market segment. It is a complex indicator that results from your marketing mix, segment by segment:
• Product offering, technology, quality, ecology,
• Products pricing
• Customer Intimacy: sales agencies coverage, sales reps, payment terms, services
• Brand reputation : advertising and corporate sustainability reputation.
• Sales Capacity is impacted mainly by your by the number of sales representatives and the production capacity.
Your actual sales can be lower than the demand to your firm, generated by your Customer Value, if your
Manufacturing or Sales Capacity is insufficient.
Transversally, your responsibility is to take care of your Market brand reputation ( generated by Advertising but also by
your Corporate Social and Sustainable reputation, which is mainly a HR responsibility) and of you Customer Value (per
market segment) which requires the contribution of many functions (R&D & Production mainly).

Market strategy
Initially, your company business scope is limited to its domestic market - Americas, EMEA or Asia-Australia. You can
opt to expand your business scope by going international (when opened by your instructor). This is achieved by
installing a representation office on a new market (1000K). The following year, you can install Sales Agencies (500K).

Customer intimacy: Sales agencies coverage (Investment: 500K, annual operating budget: 500K)
Once you are implanted in a given market, you need cover the territory with sales agencies. Agencies are required to
enable sales in a given region and organise the delivery of your products and services. The number of sales agencies
will impact the proximity and intimacy with customers. This, in turn impacts your reputation, which impacts sales.
Note that 3 sales reps are assigned to each agency (+ 2 assistants) and serve all segments where you are operating.

Distribution strategy
You can sell your products on 3 different segments. The activation of any Distribution network will open (or close) the
corresponding market segment. Don’t close too early any network: it would cut immediately this segment revenues…
Segment Distribution networks Marketing levers: see Marketing Intelligence for Market survey
Retail stores • Reputation (advertising & Social reputation)
Consumers
E-commerce • Sales Price, per Product & per market segment.
Specialty stores • Product range ( innovation)
Small Business
E-commerce • Customer intimacy: from 1(minimum) to 12 Sales agencies/Market
Direct sales (B2B) • Services associated
Enterprise • Quality index and certifications
E-commerce

Advertising strategy
In order to develop your brand awareness, you can choose among 6 advertising campaigns, professional or consumer
oriented, with costs that vary from 100 K to 1000 K, and have a different impact from one market segment to another.

Intelligence
To define in the best way and to adjust your marketing strategy, you should purchase the Marketing surveys from the
intelligence reports. The surveys provide, for each market, 3 year data on volumes, growth, sensitivity to pricing,
quality, service, advertising, reputation, agencies & sales force, and technology. Each market survey costs 20 K.

Your starting point

• 1 domestic Market, 3 market segments • Brand Reputation of 100 on your domestic market
• 3 Salesmen per Agency x 6 Sales Agencies • Customer value of 100 on each segment

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Sales
The Sales responsibility consists in defining your sales objectives, given your present customer value for this segment,
and putting together the means to achieve them: pricing, quality, customer intimacy, services and reputation.
Transversally, your responsibility is to take care of Customer intimacy (Agencies) and services (developed by the R&D
manager), given that this customer intimacy may contribute to building Customer value on specific segments.

Customer Value per market segment

Your customer proposal to the segment targeted will generate Customer
Value on the basis of 6 attributes:
• Products range (and relevant innovation)
• Price per product
• Products Quality & certifications (ISO 9000 & ISO 14000)
• Customer intimacy (agencies, salesmen, payment terms)
• Services associated (and included in your price)
• Reputation (advertising and social reputation)
The contribution of each attribute to Customer Value is displayed in the Value
Creation Intelligence survey. In the right case, the leader has been creating
customer value through better Service, Innovation & sales Agencies. This
Value Creation study may be available to you, in the intelligence Tab (20K).

Volume forecast
Essential to running a business, you must predict your revenue for the upcoming year. Indeed, all your budgetary &
financial decisions are based on expected revenue. To that end, you need to forecast your sales volumes for each
market segment, and then split the % among the products if you have multiple products.
You may estimate the volumes by looking at the previous years sales volumes, and to the market growth data.

Pricing policy ($)

Defining prices for each product is also essential to the success of your business. Your pricing policy should be based
on sensitivity to price for each segment (available in market surveys), products value and attributes (technology, quality,
ecology) and services offered. It is also recommended to verify the product margins by looking at the cost analysis in
the Forecast module, and in the Performance module, for the actual costs.
Don’t increase your price before having created the Customer Value legitimising this price increase!

Sales policy: Distribution capacity

• Sales commissions: incentives for your reps = 1% of Sales Revenue. Not negotiable.
• Payment terms: from 1 to 3 months. Longer terms will increase your sales, especially to large distribution networks.

Services Policy
If you have previously invested on new services development (in R&D), you can offer additional services. 0 to 2 options
are probably optimal per segment, but the segments very sensitive to Service may appreciate more services.
Small Businesses Consumers Enterprise
• Hotline support • Extended warranty (2 Years) • Security
• Cloud storage • Ecological Recycling • Rapid repair
Once developed (in R&D), each service can be activated for selected market segments, for a cost of 30 per unit sold.

Intelligence
To best define and adjust your sales strategy, you should purchase the Sales survey from the intelligence [Link]
provides, for each market, competitors’ data on segment volumes, products volumes, pricing, and customer value.

Starting point Consumers Small Business Enterprise Total/Average

Sales volumes 10000 10000 10000 30 000 units with 6 agencies & 18 reps
Price ($) 1000 1000 1000 1000
Revenue (K) 10,000 K 10,000 K 10,000 K 30,000 K

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R&D
The R&D responsibility consists in managing innovation (products & services), quality and ecology of your products. In
addition, the R&D department is responsible for ISO 9000 (Quality) and ISO 14000 (Ecology) certification.
Transversally, your responsibility is to take care of innovation, not only in terms of development but also in terms of
adaptation to customers needs, and contribution to you Customer value and Brand reputation…

Innovation
Innovation is a very important success factor in a Hi-Tech industry, but requires large investments, made in 3 steps:
Step 1: Technology (Research phase) Step 2 : Product (Development phase) Step 3: Selling (Launching phase)

Technology development
Initially, your company only has the T product. You can opt to bring innovative products to market. The first step of the
innovation process is to develop new technologies. You can choose between 3 technologies:
• Storage (S): high capacity memory chips,
• Communication (C): 4th generation mobile networks,
• Image (I): high definition display.
Developing a new technology (Research phase) is a requirement for the integration of this technology in a new product,
but don’t forget, the following year, to develop the corresponding new product (Product development phase), if you
want to be able to sell this new product the subsequent year (Launching phase).

Product development
The second step of the innovation process is to develop new products, based on available technologies. With 3
technologies - Storage (S), Communication (C), Image (I) - you can develop as many as 7 new products:
Simple products T-S T-C T-I
Hybrid products T-SC T-CI T-SI T-SCI
Product development takes 1 year. The subsequent year, you will be able to sell your new products.

Services development
New services development will enable further service differentiation. New services are available 1 year after .

Quality differentiation and ISO 9000 certification

• Product quality labs improve the quality of your products, which will increase the sales on segments that are
sensitive to quality (as explained in the Marketing chapter).
• Quality index reflects your quality culture and the quality of your products. It depends on multiple elements:
your investments in product quality labs, components suppliers’ quality, quality training programs, training budgets,
equitable supply relations, and a high level of motivation among your staff (CSR).
• ISO 9000 certification, attests of the quality management systems of your organisation. 4 levels (9001 to 9004) on
the basis of 3 criteria (suppliers, labs, training) which are checked in the R&D Forecast

Sustainability differentiation and ISO 14000 certification

The «sustainability» culture of your company may progress over years, depending on your efforts to develop among
your staff a strong sense of ecological and social responsibility.
These efforts depend not only on your investments in ecology labs, on your renewable energy supplying, on the
certification level of your suppliers of components, but also on your qualitative efforts in terms of training programs
and budgets, supplier relations, or local partnerships, all engaged in this «sustainable» direction. This culture will find a
recognition in your ISO 14000 certification: 3 conditions (suppliers, labs, training) checked in your R&D forecast.

Intelligence
The R&D intelligence report will provide you with the technologies and products developed by your competitors (20 K).

Your starting point

• 1 Product: T No new technologies • No ISO 9000, nor ISO 14000 certification

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Production
The Production responsibility consists of managing the manufacturing process of your company. Your main mission
consists of ensuring that the production capacity quantitatively matches the customer demand.
Transversally, your responsibility is to take care of products’ Quality and Competitivity, given that this quality & costs are
controlled by many other managers: R&D for Quality labs, HR for wages, quality training and people motivation, Sales
for pricing and new products launching, Marketing for advertising, and Finance for financing the required heavy
investments… This means a lot of coordination with your peers.. The production process is structured in 2 phases:

Production of semi-finished products

The first part of the production process is to build semi-finished products from raw materials. The assembling of the
semi-finished products is externalised.

Production machines
You adjust your production capacity by
purchasing additional machines. You can
choose between 3 machines (M2000,
M4000, M8000) the capacity of which
varying from 2 000 to 8000 units / year.

Production teams
In addition to adjusting the number of
production machines, you need to adjust the
number of operators teams assigned to the
machines. Each machine, regardless of its
type, requires 1 team of 6 technicians to
operate.

Production regulation
Production features an automatic regulation system that adapts to overcapacity or under-capacity, to a certain extent:
up to + 10% through overtime, down to - 10% through non worked hours, and under this level through semi-finished
products stock. A 110% manufacturing time means an under production capacity, with lost sales.

Production productivity labs

Production productivity labs increase productivity by 2 to 5% every year, depending on your productivity labs (0-4).

Assembling your finished products

Assembling is outsourced, fully flexible, done on demand, at a 20 $ cost / unit, without any stock of finished products.

Energy supply
You can opt to supply your production facility with renewable energy, thus reducing your environmental footprint.
It is required to achieve ISO 14000 certification.

Components supply
The assembly process combines semi-finished products with technology components to create final products. You
can choose component suppliers that are ISO 9000 or ISO 14000 certified, improving the quality or ecology of your
products.

Intelligence
The Production intelligence survey provides you with the capacity and productivity of your competitors (20 K).

Your starting point • Machines:15 M-2000 • Components quality: 0

• Renewable energy: 0% • Production Capacity: 30,000 units • Components ecology: 0

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Human resources
The Human Resources responsibility consists in managing the human dimension and the corporate social
responsibility (CSR) of your company. The overall performance of Human Resources is computed through the CSR
index. A high CSR index results in higher productivity, higher quality and higher employee motivation. A low CSR index
results in lower productivity, lower quality and can even lead to strikes. Transversally, your responsibility is to take care
of your corporate sustainability and of your social responsibility, but, of course, this means involving many other
managers for coordinating with them your training efforts and your social initiatives.

Staffing
Hiring and dismissal of employees is a functional decision. Human resources are in charge of managing and controlling
the overall staffing level of your company.

Wages
You can increase wages for each personnel category: operations, sales & administration. this will improve CSR index.
Your reps are getting the defined salary plus a non negotiable 1% commission on your sales revenues.

Training budget
You can define the overall training budget as a % of the wage bill. It impacts your productivity, quality & CSR index.

Training programs
You can choose from 1 to 4 training programs. Training programs impact productivity, quality, service and CSR.

Employee benefits
Employee Profit sharing % of operating profits redistributed to employees
Health insurance % of your payroll to improve the health of your employees
Retirement plan % of your payroll allocated to employee retirement plans

Corporate social Responsibility (CSR)

Your HR policy and your CSR initiatives will contribute to creating among your staff a corporate culture consisting of
social (internal) and societal (external) factors concerning the responsibility of the firm toward its stakeholders.

Corporate social responsibility initiatives (4 initiatives)

• Local employment priority • Internal Promotion priority
• Handicapped persons employment • Individual coaching associated to restructuring plans

Local communities cooperation initiatives (4 initiatives)

• Local programs of public health • Equitable partnerships with local suppliers
• Local programs of Education cooperation • Local ecological system preservation Program

CSR culture index

Your CSR performance will be measured by a CSR index (base 100) taking into account all your preceding efforts.

Intelligence
The social survey will provide you with the social data about your competitors: staffing, wages, training, CSR (20 K).

Your Staffing starting point

Operations Sales Administration Salary Total Count Wage bill
6 Executives 200 K 6 1,200 K
3 R&D Managers 6 Agency Managers 0 Training Manager
100 K 24 2,400 K
3 Engineers 12 Sales Reps 0 Recruitment Manager
94 Production Operators 12 Agency Assistants 14 Assistants 50 K 120 6,000 K
100 30 20 150 9,600 K

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Finance
The Finance responsibility consists in managing the investments and cash flow of your company: it implies a good
understanding of its initial financial situation ( Profit & Loss, Balance Sheet) and of the international financing rules being
used in the GlobStrat [Link] your company generates healthy profits, you can also distribute a portion of them to
shareholders through dividends, buy-back shares previously issued and decide extra loan repayment.
Transversally, your responsibility is to take care of your global profitability and capacity to finance the strategic
investments required by the implementation of your strategy, but also to have a particular view on the costs and
profitability of your different products (measured in the Forecast and Performance cost analysis, product by product).

Funding sources

Self financing capacity

The primary mean of financing investments is to use your cash flow, calculated as follows:
cash flow = retained earnings + depreciation (based on N-1 data)

Long-term loans
If your self financing capacity is insufficient to finance your investments, you may solicit long-term loans from the bank
within the limit of the bank allowances, shown in the associated « ? ». They are repaid over 5 years, and incur interest.

Capital increase
A capital increase means issuing new shares. You can raise up to 1,500 K. This will dilute your share value.

Venture capital
As a last option to finance investments, you can raise 1,000 K per year from venture capital, with a strong dilution risk

Short-term loans
You can solicit a short-term loan to finance your working capital needs. To control the risks associated with short-term
debt, the maximum amount banks loan is 5% of your previous year revenue.
Short-term loans are repaid over 1 year, and incur interest. Interest rates are available in the Environment section.
In the unpleasant event of negative cash position on your bank account, your banker will automatically cover it with
very expensive overdraft (3 times the short-term interest rate!). Short-term loans cannot be used to finance investments

Chapter 11 protection
If your company is in trouble, you can put it under the protection of chapter 11, and suspend your debt payments for
one year, and only one. This will temporarily increase your financing capacity, but will durably impact your share value.

Cash usage
If your company generates healthy profits, you can also distribute a portion of them to shareholders through dividends,
or opt for share buy-back and/or extra loan repayment.

Dividends distribution
You can opt to distribute dividends to your shareholders to stimulate your share value. The dividends distribution is
limited to your previous year earnings.

Shares buyback
If you previously issued shares from capital increase or venture capital, you can repurchase them at the current market
price. The reduction of outstanding shares will mechanically reduce your capital dilution and increase your share value.
Your buying back capacity is limited to your cash at hand in your last balance sheet.

Extra loan repayment

You can opt to perform extra loan repayment to reduce the debt of your company, thus improving your balance sheet.

Intelligence
The Finance intelligence provides the balance sheets of your competitors, and costs 20 K.
ROCE = (EBIT - Tax) / Assets + Working Capital (Account receivable + Inventory - Accounts payable) = 10 % in year 0.

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Financial rules
• Financing investments is achieved by mobilising funds from retained earnings, long-term loans and capital increases.
The rule here is that all your investments must be financed by long term financing.
• Financing your expenses is achieved through your annual revenues and by mobilising funds from short-term loans, if
needed. Yearly expenses must be financed by your revenues with the complement of short-term loans within the
limit authorised by the bank (»?»).
• Decision submission is not allowed is the above rules are not met.

Your starting point

At the beginning of year 1, all competitors have the same situation (Income Statement & balance Sheet), the same
financial resources, and the same financing rules (whatever their geographical origin).
Cost analysis of T product (per unit)
P&L (Income Statement) Budgets (K) / 30 000 units, Depreciation included
Sales (Revenues) 30 000 K Weighted average price 1 000
Cost of goods sold : Raw materials (5400K) ,energy (1500K) 230
Semi-finished manufacturing cost: -11900 Production : Staff (5000K) 220
. Purchases = 6900K depreciation: Building (100K) factory (1500K)
. Technical staff = 5000K Unit cost of semi finished product = 450
Finished products production cost: -4800 Components (T) 100
. Components = 3 000K
Assembling outsourced (1500K) 50
. Assembling = 1500K
R&D 20
. Technical R&D staff = 300K
Staff (300K), depreciation (300K)
Sales and Distribution: -5700
Advertising (1200) 40
. Advertising = 1200K
. Services = 900K Services (legal warranty: 900) 30
. Distribution:agencies+delivery = 900K Distribution: Agencies (300K), delivery (600K) 130
. Sales staff = 2700K staff (2700K) depreciation (300K)
Overheads & administrative staff -1900 Total direct unit cost = 820
EBITDA = 5 700 K Overhead charges : admin staff (1900K), financial 80
Depreciation -2300 charges (400K) Building depreciation (100K)
EBIT : Operating Result = 3 400 K Tax 25
Financial expenses -400 Total unit cost = 925
Tax (25%) -750 Unit margin 75
Net Result = 2 250 K Margin (% Revenue) 7.5%

Balance sheet
ASSETS Creation Year 0 EQUITY & LIABILITIES Creation Year 0
Cash 0K 0K Tax payable 0K 750 K
Accounts Receivable (Customers) 5,000 K Accounts Payable Suppliers 0K 1 700 K
Inventory ( semi-finished products ) 0K Long-term debts 10,000 K 8,000 K
Current assets 0K 5,000 K Liabilities 10,000 K 10,450 K
Sales Agencies 3,000 K 2,700 K Annual net profit 0K 2,250 K
Laboratories 3,000 K 2,700 K External holdings 0K 0K
Equipments 15,000 K 13,500 K Incorporated profits 0K 0K
Buildings 4,000 K 3,800 K Share capital 15,000 K 15,000 K
Fixed assets 25,000 K 22,700 K Equity 15,000 K 17,250 K
TOTAL assets 25,000 K 27,700 K TOTAL 25,000 K 27,700 K

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The agenda of your simulation

The schedule of your simulation is available in the Management tab of your Menu in GlobStrat. It is established by
your instructor and may or may not include a Practice round. It will follow, more or less, this logic:
• Practice round: this round allows you to learn the software safely in a team. You only have access to your own
performance. Your competitors' are hidden. Each team can therefore confidentially test its own strategy, and
measure its effects within a year, then correct its own mistakes, without financial risk or risk of disclosing its strategy
to competitors. The results of the Practice round are available in your company's archives via the Management tab.
• Business Model: round of strategic thinking and teamwork to develop your business model. Access the framework
for defining your business model via the Management tab and complete the form as a team. It will summarize your
strategic choices. It can be modified until year 2 and can be consulted (confidentially) by you afterwards.
• Decision rounds: 4 to 8 rounds can be scheduled by your teacher according to his or her pedagogical objectives.
The economic scenario of your simulation is available in the Marketing intelligence tab. Each decision is the subject
of a contextual help bubble (?) that reminds you of the corresponding rules: purpose, cost, impact of the concerned
decision.
• Final debriefing: at the invitation of your Professor, you will have to prepare and present your final Business Report
which will review the functioning of your team, your business strategy and its implementation, and, of course, your
Final Performance. it should also highlight your main conclusions and learning.

Market research (Marketing Intelligence)

• Before defining your strategy, open the Marketing Intelligence and analyse the 3-year forecasts provided to you free
of charge in year 1, then, from year 2, you can update them and obtain forecasts for the following three years, by
paying for the market survey (20 K). These studies are not stored by GlobStrat, but you can copy and store them
yourself in the format of your choice.
• Your knowledge of the real market corresponding to your activity in the simulation can inspire you with this or that
strategy, but be aware that the only data to be taken into consideration are those of the simulation.

Annual closing of your decisions

The annual closing of your decisions is mandatory, at the time indicated. It will allow your instructor to start the
current year's processing and generate the results. This closure checks that you comply with the financing rules.
However, do not submit your decisions until you are ready to close the final version of your decisions for the year. This
closure will block any subsequent access by your team to the year's decisions. Only the intervention of your instructor
would allow you, eventually, to re-open your access to these decisions. You should also be aware that when you
"submit" your decisions, the forecasts generated are only an estimate based on the sales objectives entered by your
team and, under no circumstances, is it a certainty or a commitment on the part of anyone to achieve these sales
forecasts. So don't be surprised if your actual sales are different from your forecasts. The important thing is that the
gap is as small as possible, so that you do not have any unpleasant surprises in terms of income (overdrafts are very
expensive!). Stay very realistic....

Teamwork evaluation
• At the beginning of the simulation, after reading the GlobStrat User Manual, a questionnaire to evaluate your
understanding of the rules of the game (Quiz1) is offered online, until the end of the year. You can repeat this Quizz1
as many times as you like, until you get a score of at least 80%.
• At the end of the simulation, a Quiz2 to evaluate your diagnosis ability can be proposed to you. it consists in 2 cases
of GlobStrat situations to analyse and make recommendations.
• At the end of the simulation, take care to assess the collective teamwork ability of your management committee. This
Peer Review will analyse the link between your company's performance and the way your team works. Be as
objective as possible in your answers to this teamwork self-assessment questionnaire which, unless otherwise
indicated by your Professor, will have no influence on your Individual assessment.

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Appendix 1 : GlobStrat available options

Marketing & Sales:
Installed on one home market (Americas, EMEA, or Asia-Australia) with 6 Sales Agencies (18 salesmen), Generalist
operating on the 3 market segments (Consumers, SME, large Enterprises), your firm is making 30 000 K$ of
Revenues with a unit price of 1000 $ x 30 000 units: Consumers = 10 000, SME = 10 000, Enterprises = 10 000.
Competing in a Hi-Tech industry, manufacturing and selling Tablets, your firm is a start-up aiming at developing its
business in many strategic directions: product & service innovation, internationalisation, Value proposition
differentiation. Your main objective here should be to increase your Customer Value, potentially building market
share and leadership, on specific market segments.
Implanting your business on a new international market will cost 1000 K (Investissement) + 3 managers x 100K.
Each new sales Agency requires a 500 K investment + an operating budget of 500 K per year.
The E-commerce option available per market requires a 500 K investment + an operating budget of 500 K per year..
A new distribution network will generate an operational cost of 500 K
The advertising campaigns incur an operating annual cost varying from 100 K to 1000 K, each year.
For each market segment on which you are operating, you will have to set the Sales objectives, the Price per
Product, the Paiement delay, and the services associated to your Price, per segment.

R&D:
3 technologic competencies may be acquired (Storage, Communication, Image) in order to develop 7 possible new
(simple or hybrid) products. Innovation will change products life cycles and stimulate market growth, but allow your
firm to differentiate its Value proposition from competitors while creating value for target customers. Getting a Quality
and/or Sustainability differentiation, is another strategic option that you may also consider. Quality and/or
Sustainability labs will cost 500 K (Investment) + 1 engineer each year. A 3rd direction consists in developing 6 new
service capabilities that you will be able to integrate in your Value proposition next year.

Production:
Your manufacturing capacity of 30 000 units with 15 machines (M2000) and 15 teams of operators is perfectly suited
to your sales, but will need new investments in new machines (M2000, M4000, M8000) with more productivity, but
with a reverse impact on the quality of your production. Your semi-finished manufacturing cost will be determined by
your equipment choices and the number of Productivity labs (costing a 500 K Investment + 1 engineer each year).

Human Resources:
Starting with 150 persons, you can set your HR policy (in terms of employment, wages, training budgets and
programs) but also invest on your Corporate Social Responsibility (CSR options including Profit sharing, Health and
Retirement plans, Stakeholders internal or external initiatives). These options will not only improve the motivation of
your staff toward Productivity or Quality, but will also create CSR value, measured by an index, and contribute to you
social reputation on certain markets, where this CSR index may create Customer Value.

Finance:
You will have to engage several huge investments in the next years. Finding the Long-term resources ti finance them
on a sustainable basis, will be a challenge given that your resources are limited: your sep-financing capacity (4550 K) is
substantial, but the development of a new product (Technology + Product) alone will need 3 000 K in one or two years.
You may add a limited capital increase of 1 500 K (in one or many years) which will create an additional LT debt
capacity, given that this capacity is limited to 2/3 of your capital (Equity). Exceptional Venture Capital may be available
but will strongly dilute your Capital and penalise your Share Value. A Chapter 11 suspension of the reimbursement of
your Long-term debt is possible (once) but again will penalise durably your Share Value. So be aware of the limitation
of your financial Resources and manage your investments carefully.

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Appendix 2 : Decisions cheat-sheet

Marketing
Decision Investment Staff Cost Impact
Representation Office 1,000 K 3 managers 300 K Total available market
Sales Agencies 500 K 1 Mgr + 2 Reps 500 K Customer intimacy, Customer value
Distribution Networks - - 500 K Total available market
e-Commerce 500 K 1 Mgr + 2 Reps 500 K Sales volumes, Reputation
Advertising Campaigns - - 100 - 1,000 K Brand image

Sales
Sales objectives / Segment - Volume - Sales Forecast, Revenues forecast
Price / Product - $ Sales Revenue
Commission - - 1 % of revenue Reps motivation
Payment terms - - Cash flow Sales volumes; Customer intimacy
Services - 30 $ per unit Customer value

R&D
Technology Development 2,000 K 5 engineers 500 K Ability to develop new products
Product Development 1,000 K 5 engineers 500 K Ability to sell new products
Service Development - 2 engineers 200 K Ability to add new services
Product quality
Product Quality Labs 500 K 1 engineer 100 K
ISO 9000 certification
Product Ecology Labs 500 K 1 engineer 100 K Product ecology, ISO14000 certification

Production
Renewable Energy - - +12.5% per level ISO 14000 certification
Quality Components - - +10% per level ISO 9000 certification
Ecology Components - - +10% per level ISO 14000 certification
M2000, M4000,M8000 Machine 1000 to 3000K 1 team= 6 ops 300 K 2,000, 4,000, 8,000 units per machine
Productivity Labs 500 K 1 engineer 100 K Production capacity, Production cost

HR
Hiring/Firing - - 50% of salary CSR index
Wage Increase - - increase % CSR index, quality, productivity
Training Budget - - % of wage bill CSR index, quality, productivity
Training programs - - 100 K CSR index quality, productivity
Benefits: Health Retirement - - % of payroll CSR index
Employee benefits: Retirement - - % of payroll CSR index
Profit sharing - - % of EBIT CSR index
Local CSR initiatives - 1 manager 100 K CSR index

Finance
Decision Conditions Limits Cost Impact
Long-term loan 5 years loan 2/3 of capital 5-8% per year Investment financing
Capital increase - 1,500 K 10% discount Investment financing
Venture Capital funding - 1,000 K 50% discount Investment financing
Short-term loan 1 year loan 5% of revenue 4-6% per year Cash financing
Dividends distribution Profit. Cash Cash available Amount in K Share value

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Appendix 2 : Detailed Profit & Loss Statement

Revenues 30 000 K
. Sales of finished products = 30 000 units x 1 000 $
Cost of goods sold (based on products sold, not including inventory)
Semi-finished manufacturing cost: -11 900
. Purchases (Raw materials (180 $ x 30 000) = 5 400 K
. Energy (50 $ x 30 000) = 1 500 K
. Technical staff : 94 technicians (6 x 15 teams + 4 logisticians) x 50 k = 4 700 K
. Technical staff : 3 Engineers x 100 K = 300 K
Finished products production cost: -4800
. Components = 100 $ / unit sold x 30 000 = 3 000 K
. Assembling = 50 $ per unit sold x 30 000 = 1 500 K
. Technical R&D staff = 3 R&D engineers x 100 K = 300 K
Sales and Distribution: -5700
. Advertising: TV = 1 000 K + Exhibitions = 200 K = 1 200 K
. Services: 30$ (legal warranty) per unit sold x 30 000 units = 900 K
. Distribution: agencies expenses ( 50 K x 6 agencies) + delivery (20$ x 30 000 units ) = 900 K
. Sales staff: 18 Salesmen x 100 K + 12 assistants x 50 K = 2 400 K
+ 1% Commissions (30 000 K x 1%) = 300 K
Overheads & administrative staff (fixed costs) -1900
. 6 Executives x 200 K = 1 200 K
. 14 Administrative assistants x 50 K = 700 K
EBITDA = 5 700 K
Depreciation -2300
. Machines = 1 000 K x 10% x 15 M2000 = 1 500 K
. R & D Laboratories = 1 000 K x 10% x 3 labs = 300 K
. Agencies = 500 K x 10% x 6 Agencies = 300 K
. Buildings = 4 000 K x 5% = 200 K
EBIT : Operating Result = 3 400 K
Financial costs (interest over 8 000 K of Long term debts x 5%) -400
Employee Profit sharing = 0
Non recurring expenses (Manufacturing Restructuration costs = 40 % of Net Assets sold) = 0
Tax ( EBIT - Financial expenses - Employee Profit sharing - Non recurring expenses) x 25% -750
Net Result = 2 250 K

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Appendix 3: GlobStrat Introductory Course (Videos and other resources)

Some steps will probably be proposed to you face-to-face, others can be done individually at a distance, at your own
pace, but preferably before starting your team work.

• Downloading and reading the User Guide: The manual explains the starting situation (business case)
and the rules of the game.
Don't leave this competitive advantage to your competitors!

• Presentation of the simulation: Download and view the PPT corresponding to the presentation
(PDF), available in the documentation.

• Presentation videos available on YouTube:

• Overview of GlobStrat: [Link]

• Process of defining your strategy: [Link]

• Interface Overview: The QuickStart guide to be downloaded in the documentation presents the
main features of the interface.

• Tutorials: View 3 tutorials (12')

• General view of the interface: [Link]

• Decision making process: [Link]
• Annual diagnostic process: [Link]

• Practicing the interface: Feel free to browse around the interface to familiarize yourself with its
architecture. One or two Practice rounds can also be proposed by your teacher.
Once you think you have mastered the simulation, take the Quiz1.

• Quiz1: it measures your understanding of the simulation and can be repeated as often as necessary,
until the end of Round 2, in order to improve your score and reach 80% to 100%.
This score is part of the evaluations available to your Teacher.

• Organization of your team: divide up the roles / functions, as a team, in the tab Management /
Organization.
Then define as a team the working method that will lead you, within the time limit, to the closure of
your decisions each year.

• Definition of your strategy: Analyze the market studies available in the marketing Intelligence and
define, as a team, the main strategic direction of your team. Then refine your Business Model in the Management /
Business Model tab and save it. You will be able to modify it until year 2.

• Presentation of your strategy and your Business Model to your Teacher, in a form to be
discussed with him/her: oral presentation, video?

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Appendix 4: Our recommendations to redefine your business model

Your company already exists. It initially has a set of resources which, at this stage, do not differentiate it from its
competitors, with the exception of their initial location (domestic market).
Re-defining your Business Model will therefore be essential in order to generate a Competitive Advantage that will
eventually allow you to outperform your competitors in a sustainable way. Set it at the outset. It can be consulted and
modified by you throughout the simulation. You can be reactive and adjust your strategy.
To do this, GlobStrat offers you a tool to formalize your Business Model (available in the GlobStrat Management tab)
and a strategic thinking method adapted to GlobStrat, in 8 steps:

Step Key questions Concepts & tools

1 Industry analysis (prospective analysis of your environment): Porter's Forces

In what kind of business is your company in the simulation? PESTEL analysis,
What are the external factors that determine economic performance in the Scenarios, Cost Structure
industry simulated by GlobStrat? Strategic groups,
How can this environment change? What is your scenario? Cost of Capital

2 Prospective analysis of Markets (growth, FCS, customer expectations): Strategic segmentation,

Market segmentation, expectations of the different market segments, Marketing segmentation,
Evolution of the different markets (c.f. Marketing Intelligence) free in year 1. Customer targets,

3 Analysis of your company's current strategy (Business Model): Business Model,

Dominant strategic focus & characteristics of the current business model. Value Chain
Is this Business Model viable for the future? What are the main strategic op- Value Network
tions available to your company, as well as to competitors? Strategic Resources
What Resources can you rely on? Innovation

4 Competitive dynamics (positioning & reactions of competitors): Competitive dynamics

Your competitors are doing the same strategic thinking at the same time. Game theory
Do you have even weak signals on their strategic direction? Network effects
In your opinion, which strategic directions will they focus on? Competitive advantage
How do you imagine their reactivity, and yours? Responsiveness, Agility

5 Social and environmental responsibility (Values of your team): Values, Purposes

What level of Social Responsibility do you want to achieve? Corporate governance
What level of Environmental Performance do you want to achieve? Sustainable Development
Which Profit-People-Planet balance do you want to achieve? CSR, Triple Bottom Line, ESG

6 Definition of your business strategy (creating a competitive advantage): Business Model

Define your Strategic Vision (Becoming...), in one sentence, if possible, Value Proposition
Define your Customer Targets and Value Proposition, Value architecture
Define your future Value Architecture: Value and Network Chain, Economic, social
Define your economic equation (Financing, Profitability). & environmental equation

7 Definition of your Corporate strategy (creating Value): Vertical integration,

Which internationalization strategy for your business? Diversification,
Which outsourcing strategy (if authorized) for your company? Internationalization,
Which Alliance Strategy (if authorized) for your company? Alliances & Partnerships

8 Implementation of your Strategy (create coherence): Business Plan

Define your Investment and Financing Plan (Business Plan) Leadership,
What are the implications of your strategy, in terms of Leadership, Organization
Organization and Decision-Making process of your team? Decision-making process

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Appendix 5: Tips for Implementing Your strategy

Year 1: Your product innovation strategy should begin to take shape in the development of a technology that is
essential to the success of your strategy or, in any case, the development of a new product that will contribute to it,
whatever your strategy, bearing in mind that you will only be able to market it in year 3.
Your internationalisation can be started in year 1, if it is a strategic priority. It will necessarily be spread over 2 years:
installation in year N of a Representative Office, then of Sales Agencies and distribution networks, the following year.
Starting to develop new services will make sense if your target customers are sensitive to it, knowing that their
development takes a year before they can be associated with your offer. In the absence of new products in year 1,
your price positioning may begin to evolve, but avoid excessive increases, knowing that your possible differentiation
will not be perceived instantly by your customers. Any decrease in your prices will be perceived without delay and can
therefore have rapid but not necessarily lasting effects if your costs are not subject to the same orientation. A
beginning of differentiation of your offer is possible in the short term via a Quality and/or Sustainable Development
certification process or investments in Customer Proximity (Commercial Agencies). However, the total of your
investments cannot exceed your financing capacity: make sure that you define your policy for mobilizing available
resources: self-financing capacity + debt capacity + a possible capacity to increase capital, if you are prepared to take
the risk of dilution, linked to any Capital.

Year 2: This will involve continuing the implementation of your strategy or clearly stating it if you would have
preferred a cautious start the previous year. A strategic shift is still possible in the event that a strategic opportunity
emerges clearly in the light of an analysis of your competitive environment. In this case, you can revise your Business
Model in the Management page of your interface.
Don't wait too late to start your internationalization process, the investments required (Representative Office + Sales
Agencies + Distribution Networks) will take years to pay for themselves.
The pursuit of your innovation strategy (Products & Services) will undoubtedly be necessary, but will benefit from
being complemented by differentiation or customer proximity actions or competitiveness (costs)...while your
financing capacity will depend on the amounts mobilized (N-1) and your cash position at the end of year 1.
In other words, if your year 2 is likely to be fundamental in terms of strategic investments to build your economic
(Profit) but also social (People) and environmental (Planet) future... Think about it now!

Year 3: This is the last decisive year in terms of preparing for your future. Your strategic positioning must find its
culmination here, especially as your strategy must begin to pay off in terms of market share, and therefore revenue and
profitability. Leaderships must begin to emerge on your customer targets and it is time to take the sting, i.e. to
validate the creation of a competitive advantage that will have to be defended and strengthened in the coming
years. If no competitive advantage is visible at this stage, a thorough examination of your situation vis-à-vis
competitors (benchmarking) is necessary. Should you encounter financial difficulties, this is your last chance to take a
strategic turn, after which it will be very late. In any case, a mid-term strategic audit (in progress or at the end of
year 3) can be very useful in order to shed light on the following years of your simulation.

Year 4 and following: After 3 years marked by considerable investment efforts and, perhaps, sustained growth, it
is now up to you to ensure the profitability of your investments on the simulation horizon... and to prepare yourself to
face storms: the economic situation (life cycle helping) may prove less favorable, your competitors may react sharply,
crises may appear here or there... even your competitive advantage may be challenged by slower but solid
competitors, or on the contrary, may be on the brink...
Your success must be built over time and this is the time to consolidate it: investments may still be necessary in order
to strengthen and/or defend your competitive advantage.
Optimizing your financial situation through share buybacks (if you had previously issued shares) or dividend
distributions, or even early repayment of long-term loans, can become a priority if your resources allow you to do so.
But creating value for your shareholders won't be enough, your Corporate Social & Environmental
Responsibility will probably make the difference, compared to other potential leaders or simply to your values and
goals. Don't wait until the last simulated year to build them!

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Appendix 6: Pricing Policy (setting your sales prices in GlobStrat)

Setting your sales prices is a delicate and essential decision. In simulation, as in the real world, it obeys many strategic
and operational rules that make Price the point of convergence of several economic reasoning, knowing that there is
no psychological price in GlobStrat.

Microeconomic reasoning takes into account the elasticity of demand... in relation to price. It expresses a statistical
relationship between the fixed price and the demand for the product.
Price elasticity is negative: the higher the price charged, the lower the demand, and conversely, the lower the price, the
higher the demand. This is true for most industries and products, including those in this simulation.
Nevertheless, this price elasticity can be more or less strong from one market segment to another, which is taken into
account in GlobStrat's market studies (marketing intelligence) by the notion of Price Sensitivity. This measures the
variation in elasticity from one segment to another and over time. Individuals, SMEs and Companies do not react in the
same way to price, but all of them consider that any significant price increase should be legitimized by a (prior) increase
in the value created for the customer. The base 100 of this sensitivity corresponds to the average elasticity of the
industry in year 0. This price elasticity is and will remain negative throughout the simulation: price increase => decrease
in demand... but the impact of the price on demand will vary from one market segment to another and may change
over time according to the evolution of the price sensitivity index (compared to base 100 in year 0).

Marketing reasoning considers price as part of the marketing mix and takes into account a strong external factor:
the market price, in other words the price of competitors for the same product. More recently, it has added the notion
of "willing to pay", which is the price that the customer is willing to pay for a given product, knowing that this amount
depends on the value that the product creates for him. The higher the value created, and perceived as such by the
customer, and the lower the price sensitivity, the more acceptable the price increase will be. The timing of a possible
price increase, in relation to the Customer Value created, is therefore essential. The Sales Intelligence will be very useful
to know the value created for their customers by the different competitors and their Sales Price.

The accounting reasoning takes into account the (full) cost of the product. GlobStrat calculates it in the Cost
Analysis that is proposed to you, in forecast in the Forecast for the following year, as in actual in your Performance of
the past year, for each product. The difference between the fixed price and the actual cost of goods sold is used to
establish the margin, expected or realized, positive or negative, in $ and in % of the selling price. Selling at a loss (with
a negative margin) can be tempting to gain market share in certain more price-sensitive market segments. However,
such a policy leads to losses (even if they can sometimes be offset by other more profitable products) and is not
sustainable in the long term. We therefore advise you to keep your costs down so that you can reduce your prices
without selling at a loss. Price is not a sustainable competitive advantage, but reducing your costs can be!
The positive margin to be achieved on a given product is a sensitive issue that varies greatly from one industry to
another. It is initially 7.5% in Globstrat and should be able to increase in the future, thanks to the increase in value of
the products (Quality, Service, Innovation, Certifications) or to lower your costs. The cost and margin analysis tool
offered free of charge in GlobStrat (in Forecast and Performance) should allow you to measure your Margin per product
and thus ensure that this margin remains reasonable (between 5 and 20%): too low, it could lead you to sell at a loss,
too high it would probably cause you to lose market share or reflect an excess of optimism on your part.

The strategic thinking is even more complex. It takes into account all these dimensions by making the product
(innovation, differentiation), its price, the company's reputation and its customer proximity... attributes of value creation
for the customer that justify, and even legitimize, the company's ability to re-capture part of the value created for the
customer, via its sales price. The price is part of a Value proposition that must be "consistent" and reasonable, taking
into account your Business Model and the value actually created for the customer.

Tip: Only vary your prices by a reasonable amount (a few % per year!) and create customer value first before
reasonably increasing your price. In other words, raising your price by 30% or more quickly would be suicidal. Similarly,
lowering your price too much can ruin you from the 1st year!

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