Module 4 – SLP
STRATEGY IMPLEMENTATION AND MONITORING
The Module 4 SLP requires that you run a simulation
entitled: “The Platform Wars: Simulating the Battle for Video Game Supremacy.”
Visit the Forio site, and access the simulation here:
https://forio.com/simulate/mit/video-game/simulation/
Click on “Play as an individual.”
Enter your first name as the “Screen ID,” then click
“Login.”
In this web-based simulation, you are a senior manager of a
video game hardware platform producer. Each year, you have three decisions to
make:
Determine the price of the video game console;
Determine the number of video games that your company will
subsidize to enhance the development of new video games (and that can be played
on your company’s video game console); be sure to note that the subsidy of each
new game costs you $162M each year; and
Determine the royalty percentage you will require game
makers to pay you (the higher the royalties, the more revenue you earn on new
games, but the less inclined game makers are to develop new games).
At the start of the simulation, your market share is 50%.
The price of your video game console is $250.00 (note that your competitor’s
market share is 50%, but your competitor’s console price is $370.00 (hint: you
are vastly underpriced to begin the simulation).
As the CEO, it is your task to make decisions one year at a
time. As you do so, note how key data are changing, and take note of how your
pricing, changes made to royalties, and new game subsidies change your profits
and your market share. You may need to go through at least one practice run of
the simulation in order to become familiar with it.
One way of becoming familiar with the simulation is to
change only value, leaving the others constant. This will isolate the impact of
one variable, and will give you a sense of how the change in a single variable
impacts revenue, market share, etc. (use the Dashboard and the financial
statements to determine this). For example, if I leave all variables unchanged
in Year 1 (price = $240; Game titles to subsidize = 3, and Royalties = 15%), my
market share becomes 69% at the end of Year 1 (and my net profit is $48.0M). In
contrast, if I reduce the console price to $230, my market share becomes 71% at
the end of Year 1 (and my net profit is $33.6M). Importantly, if I increase my
console price to $330, my market share at the end of Year 1 is 58%; however, my
net profit is $140.8M!
As the CEO, your task is to find the best combination of
changes in the three variables that both increases your market share and earns
a maximum net profit. Remember that the changes are relative; there are no
right or wrong answers. Your goal is to use the knowledge you have acquired
from previous courses (Accounting, Marketing, Finance, etc.), and allow the
various statements and the Dashboard to guide you in your analysis,
accumulating high market share and revenue. Be sure to take note of how the
statements may be used to “control” your strategy! Remember that you need to
cover your costs, while simultaneously turning a profit and increasing your
market share.
SLP Assignment Expectations
As the CEO, you are asked to run the simulation a minimum of
three (3) times, noting the changes made each year, as well as your final
results. Then, write a 2- to 3-page memorandum to your Board of Directors,
informing them of how changes in the variable (e.g., the price of the console;
royalties paid by the game maker; and changes in the number of game titles
subsidized) affect total market share, revenue per year, and net profit per
year. Be creative, and include some tables and graphs in your written analysis
to show your changes and/or results.
