1. The Business Strategy Game TM

2. Hands-On Learning Opportunity

Look for Ways to Secure Competitive Advantage

Evaluate Different Courses of Action

Chart a Course for Your Company

Assess Changing Industry and Competitive Conditions

Diagnose the Strategies of Competitors and Anticipate Their Moves

3. What You Can Learn

Proficiency in Using Strategy Tools

Reinforce Functional Course Learning

Stronger Understanding of How Functional Disciplines Fit Together

Improved Insight Into Global Competition

Enhance Understanding of Revenue/ Cost/ Profit Relationships

Challenging and Fun!

4. The Business Strategy Game TM The Industry: Athletic Footwear 5. Market Segments Europe 10 - 25% Asia 15 - 35% Latin America 15 - 35% North America 5 - 20% Geographic Market Projected Annual Growth 6. Industry Sales Projections (000S Pairs Per Company) Year 11 12 N.A. 1,500,000 1,650,000 Asia 450,000 575,000 Total 3,225,000 3,950,000 Private Label 650,000 700,000 L.A. --300,000 Branded Europe 625,000 725,000 7. The Role of theS&P 500 Index

Year to Year Changes In Index Effect Next Year's Industry Demand

Maximum Impact Is +/-10%

8. The Role of Competitive Aggressiveness

• Prices

• Quality

• Service to Retailers

• Number Models in Product Line

• Product Image

Actual Numbers Are Influenced by Industry Marketing Efforts

Industry Demand Forecast Assumes Year 10 Levels of:

9. The Weapons of Competitive Rivalry

Product Quality

Service to Retailers

Number of Retail &Company Owned Outlets

Annual Advertising

Number of Models

Customer Rebates

Product Image

Wholesale Selling Price

10. Branded Footwear Sales

Combination of All Competitive Weapons for Your CompanyAs Compared to Competitionby Geographic Market

11. North American Private-Label Sales

Offer Price at Least $2.50 Below Average ofBrandedWholesale Prices in North America

Lowest Price Wins

Ties Go to Higher Quality Company

Offered in Multiples of 50,000 Pairs

Minimum Acceptable Quality and Models Levels

12. Demand Forecasts

Getting good estimates gives you a reliable profit forecasts

Conservative estimates are better

The Business Strategy Game TM 13. The Business Strategy Game TM Operations Decisions 14. Product Quality Quality Driver Impact % Long-Wear Materials 0 - 90 points Current QC/Pair 0 - 45 points Cumulative QC/Pair 0 - 80 points Styling/Features Expenditures Per Model 0 - 90 points 15. Material Prices

Drop If Industry Capacity Utilization Falls Below 90%

Rise When Industry Capacity Utilization Exceeds 100%

When Total Usage of Long-Wear Materials Goes Above 25%

• Long-Wear Prices Rise / Normal-Wear Prices Fall

When Total Usage of Normal-Wear Materials Goes Above 75%

• Normal-Wear Materials Prices Rise / Long-Wear Prices Fall

16. Labor Force Decisions

Number of Workers to Hire

Annual Wages

Incentive Pay

17. Labor Productivity Drivers

Incentive Pay As Percentage of Total Compensation

Total Compensation (Without OT) Compared to Rivals Local Plants

Automation Options Installation

Cumulative Production Methods Improvement Spending

Percentage Increase in Annual Wage

18. Reject Rate Drivers

Current Quality Control Expenditures Per Pair Produced

Piece Rate Incentive/Pair

Number of Models

19. Production Methods Improvement (PMI)

Reduce Materials Costs by As Much As 25%

Improve Worker Productivity by up to 500 Pairs Per Worker

PMI Spending Effectiveness Drivers:

• Cumulative Spending at Plant Per Pair of Plant Capacity

• Greatest Impact at Texas Plant Due to its Older, Less Efficient Layout

Reduce Supervision Costs by up to 25%

20. Number of Styles/Models Number of Models Production RunSet-Up Cost 50 100 150 200 250 $1 million $2 million $3 million $4 million $5 million 21. The Business Strategy Game TM Plant Decisions 22. New Plant Construction

Maximum of 4 Plants

Texas: 1 Million Pairs Current Capacity

Asia: 3 Million Pairs Current Capacity

Europe: Potential Construction Site

Latin America: Potential Construction Site

23. New Plant Construction Size Capacity in Pairs Small 1 million Medium 2 million Large 3 million 24. Expansion

In Millions of Pairs

Up to 4 Million Pairs at a Time

As Many Times As You Want

25. Automation Options

• Increase Labor Productivity And/Or

• Reduce Production Run Setup Costs And/or

• Plant Supervision Costs And/or

• Production Capacity

Up to 3 Options Per Plant

Six Options Available Basically for

26. Other

Permanent Capacity Shutdown

• Entire Plant or Portion

Temporary Plant Shutdowns

• Approximately 90% Productivity Upon Recall

Purchase and Sale

• Entire Plant or Portion

• Require Advance Instructor Approval

27. The Business Strategy Game TM Marketing Decisions 28. Private Label Market

Bid Price

Number of Pairs to Offer

• 50,000 Pair Lots

Number of Unsold Pairs to Convert for N.A. Branded Market

29. Branded Markets

Wholesale Price

Advertising Expenditures

Retail Dealers

Customer Rebates

E-tailing is an increasing % of Market

30. Service Rating

Delivery Time Achieved in the Previous Year

Stockouts the Previous Year

On average you should spend $500 per representative

High of 80 for Not Stocking Out

Low of -170 If Stockouts Exceed Branded Sales by 100% or More

31. Service Rating Delivery Time Cost per Pair Service Points 4 0.00 0 3 0.20 20 2 0.50 60 1 1.00 100 32. The Business Strategy Game TM Financial Decisions 33. Financial Strategy

Significant Element in Determining Company Performance

Financing Will Be Required To Expand With Industry

Maximize Shareholder Wealth

Search For Optimal Capital Structure

34. Short-Term Loans

Rates Determined by:

• Current Year's Bond Rating

• Current Year's Interest Rates

Maximum Issue/Year $100 Million

Automatic Loans to Meet Cash Requirements

• 2 Point Interest Rate Penalty

Interest Received On Cash Balances

• 3 Points Below Prime Rate

One Year Term

35. Bonds

Rates Determined by :

• Previous Year's Bond Rating

• Current Year's Interest Rates

Maximum Issue/Year $100 Million

Require 2.0 Times Interest Coverage

Early Re-Payment Possible

• 2% Prepayment Penalty

Maximum of 8 New Bond Issues

Ten Year Term

36. Common Stock

Maximum Issue/Year $200 Million

Currently 5 Million Shares Outstanding

• Minimum of 3 Million Shares

• Maximum of 50 Million Shares

Issued/Retired at a Discount/Premium From the Current Price

• Price Shown on Screen

37. The Business Strategy Game TM

Backups Can Save You Time & Effort

SCANYour Disk Before and After Use

If Disk Goes Bad, Have it Restored

Computer Operations 38. Bad Data Entry No Excuse

Company Data Disks Have Year 10 Decisions

Program Checks for Data Entry Errors

Invalid and Out-of-Range Decisions areExposed

Player's Manual and Screen Instructions Explain Correct Data Requirements

39. Winners

Develop a Unique Strategy and Stick With It

Understand Company Operations

Analyze Their Competition

Are Proactive

40. Losers

Fail to Develop a Unique Strategy

Typically Change Strategies Significantly Several Times As They Try to Copy Successful Competitor's Strategies

41. Losers

Don't Analyze Whats Going on & Consequently Mis-Guess Competition

Are Always Trying to "Catch-up"

Don't Understand Company Operations

Don't UnderstandHow to Run the Game

42. Strategic Issues

How to Position the Company in the World Footwear Market

Where Should Additional Production Capacity Be Located

What Competitive Strategy to Follow and What Kind of Competitive Advantage to Try to Build

43. Operating Issues

Whether Cost Savings Can Be Realized in Any Portion of the Value Chain

Whether to Continue Comparable Offerings in All Market Segments

Employee Compensation in Texas & Asia

What to Do in Year 11 to Prepare for the Expected Demand in Year 12

What to Do About Texas Plant's High Costs

44. The Business Strategy Game TM Questions