Author: bsgmaster

Although the big news for 2020 has obviously turned out to be the effects of the COVID19 coronavirus pandemic outbreak, many business students still have to struggle with the difficulty of playing the Business Strategy Game to get a good grade to graduate.

The BSG Game went through a major revision in the beginning of 2019.  The screens and reports were changed.  The conditions of the game environment were altered, include the location and amounts of import tariffs charged in each region.   Bidding for private label production contracts has new restrictions on the amount and quantities that may be bid in order to give some teams a better chance of winning a bid, while other teams might have a worse chance to win the bids.

As a result, I highly recommend that you not use any BSG advice or videos that were created before 2019.   You also should take great care to be sure that recent videos are based on the current version of the game, which will take quite a bit of effort for you to do.   You can’t determine this unless you study the current version to know the game details.

If you follow the old advice, you’re chances of doing well in the game are basically ZERO.   You will fail the game with a low score if you follow old or bad information.   Do not assume that all or most of the advice that you find is good.  In fact, you should carefully compare and contrast the information you see to assess the quality of the info as best you can.

If you see a video on youtube claiming to help with the BSG Game, should you trust it?   In general, NO.   Does the video maker have a full set of videos covering the whole game, from start to finish, including the results of the last year of the game?   How do you really know whether the video maker did well in the game himself or herself if the details are results of the last year of the game aren’t provided?   You don’t.  You can’t determine the success of a sports team for a particular year without knowing the scores and final results of the season.  Then why would you accept the advice of someone if they might be hiding the fact that they couldn’t even win the game that they played?   There has to be enough detail provided to determine the quality of the information being offered to you.

In my case, I’ve won the game many times personally and hundreds of teams that I’ve tutored have won their games.  Some teams have gone further to become BSG Grand Champions by winning the Global Best Strategy Invitational Tournament.

However, I don’t provide the details of these wins to protect the privacy of the students.   So how can you trust the info I provide?   I don’t want you to trust it.   What I do is to teach how the game works on a step-by-step basis using skype with screen sharing by using the game itself.   When you learn how the game works,  THE GAME WILL TELL YOU WHETHER WHAT YOU’RE DOING IS BETTER OR WORSE WHEN YOU TRY DIFFERENT OPTIONS.   The trick is to learn how the game does this and how to properly interpret the results, because sometime poor decisions can seem better on the surface in the short-term if you aren’t doing an in-depth analysis and evaluation of the long-term impacts that the game doesn’t easily provide for you.  It usually does provide the info to make the best decisions, but that takes a lot of digging and analysis to discover.

Besides letting the game tell you whether my advice is good or not,  I also spend a lot of time for each year of the game to explain in advance what the goals and objectives are so that you can determine the success and failure from the results of each year of the game that’s left.   You will quickly see that my advice and prediction are extremely accurate.  You don’t need to trust me when you see the reliability of the results.  I’m also explaining all the reasons for why the game works the way that it does, which you can also verify for yourself as I’m showing you how it works.

I just spent the last several hours examining all of the Business Strategy Game related video advice that has been posted on YouTube over the last year or two.   Wow!  The quality and reliability of everything posted that I found is absolutely terrible.  I didn’t find a single good video with reliable info out there.   The biggest problem are those students who think that they know how to play the game well merely because they seem to be doing well in the game.

Relying on those students is like trusting kindergarten age students’ advice about how to play professional baseball, football, basketball or other sophisticated sporting games.   Just because someone is doing well when playing the game for the first time against other equally novice competitors doesn’t mean they really know anything useful about how to play the game against good competitors.   Besides winning all the games I’ve played for myself in my business classes and in the Invitational Competition, I’ve observed thousands of games and I’ve coached hundreds of teams to win first place.   I don’t mention this to brag but merely to point out how dangerous it can be to your own success if you trust individuals for advice without carefully evaluating their level of experience and skill.   It takes very little effort to produce these terrible videos.  It’s disappointing and shameful to see such amazingly bad info being given out.

If you want to do well when playing the Business Strategy Game (BSG), the most important tip I have for you is to study the Player’s Guide as if it’s preparation for a college-level final exam.   That means not merely casually skimming the guide in a few minutes, but really putting effort into reading every single paragraph, taking notes, printing it out, highlighting everything that seems important, and then reviewing anything that seems difficult or confusing until you feel confident that you understand it.

This may seem like obvious advice, but I frequently discover that students haven’t bothered to study the guide at all.   While the guide doesn’t contain everything that’s important about the game, it does contain a lot of information that is essential to know and that becomes the basis for most winning strategies and tactics.

Yes, it’s a long 35 pages, but that’s a lot less information than most college textbooks contain.   For some strange reason, many students don’t take the BSG game very seriously until they are losing the game with a very low score.   It’s much more difficult to improve the poor results of a team that has made many bad decision due to ignorance of the basics of the game than to get started on the right track from the start.

So if you haven’t really studied the guide with diligence, then you can start right away by reading it now.  Here’s a link to the PDF.

I have a cardboard box here that I’m putting up for bid in a pretend auction.  It’s a real box.  It’s about 2 feet long, 1 foot wide and 1 foot deep.  I’m not going to tell you what it’s worth, but I’m calling it the “Celebrity box.”  It may not even be a good box.  The contents could be worth nothing or $15 million US dollars, or anything in between.  It could have diamonds or air.  You would have to pay for shipping to find out what’s inside.

If it sounds crazy, stupid or foolish to bid anything for it, then you’re right!  Your brain must be working.  You should NOT bid real money for anything of completely uncertain value, even on the off-chance that it could contain something of value.

Now what if you see other people bidding $10 million to $20 million on the box?  Does that make bidding on the box a more reasonable option?  What if I told you that I invented a new currency called BSGcoin that was worth the same as the US dollar, but could only be for bidding on this box.  What if I gave you $50 million of BSGcoin for bidding?  You might consider bidding on it because you’re using other peoples money and there’s no apparent consequences if you discovered that the box was empty.   But does that make the choice to bid on it to be a good business decision.  Of course, not.

Yet this is exactly what many students do when they play the BSG game for the first time.  They bid on celebrities without having the slightest clue about what a celebrity may be worth to them.  Don’t be them.  Don’t do this.  Don’t bid on things unless you have a good way to know what they’re worth.

 

 

In the world of the BSG simulation, being a celebrity must be a much better career choice than being the executives of a shoe manufacturer.  In many games of this Invitational, the celebrities are making a lot more money than the companies that contract with them.

For example, there’s one team playing in the Invitational that’s contracted to pay about $170 million to celebrities each year, while their own net profit is less than $2 million.  They have 9 celebrities at the moment, paying up to $26 million each, with an average of $19 million.  This team is completely wasting millions of dollars with no benefit at all to themselves.

Celebrities don’t have some magic power to make your company profitable, which apparently some BSG players don’t realize.  Celebrities are merely just another form of advertising, except unlike regular advertising, companies are allowed to bid much more than they’re worth in increased sales vs. their cost.

Perhaps these players haven’t noticed that the Sales projection screen lets values be entered for celebrities to see how they affect sales and profitability, just like advertising, rebates, and the other factors that affect consumer demand.  The maximum celebrity value for each region is 500, but like all of the demand factors, they have diminishing returns.  In other words, the first 100 of celebrity value has a much higher affect on demand than the next 100 added to it.  Going from a value of 400 to 500 has a much smaller increase in demand than from 0 to 100.   Celebrity values above 500 result in no increase to demand at all.

Therefore, having 9 celebrities is wasting a large percentage of the money spent on them, since the celebrity values per region will hit the maximum with many fewer than that number.   Due to diminishing returns, even the celebrities that contribute to the 500 maximum value are worth much less, the more that are contracted.

I’ve observed hundreds of games played in the Invitational.  Here are some of my observations.

Many teams that end up winning often have no celebrities at all by the end of the game, and often have few celebrities at all after year 15.  That’s because it only takes one team to go crazy on the bidding to make all celebrities to be over priced.

Most teams that overbid for celebrities will have no chance of winning the game.  They usually end up at the bottom of the rankings.   That’s where they should be ranked.  They’re throwing away their company’s money.

Any team can win bids for celebrities.  It take no skill whatsoever to bid more than other teams.   It’s much harder to bid values that you know will be profitable if you do win the bid.  You lose no money when you lose a bid that would be unprofitable. In fact, you save your company money when you don’t win unprofitable bids.

If you don’t know how to calculate the value of a celebrity: DON’T BID AT ALL.  Overbidding for celebrities is one of the most common ways that teams lose the game.  Overbidding only make the celebrities rich while your own company heads towards bankruptcy.  In the example above, the team has paid their celebrities more in one year than they’ve made in profits for 5 years.  That’s beyond foolish.  It’s irresponsible mismanagement.

The point of celebrities is to bid an amount that will be PROFITABLE.  It’s better not to have any celebrities at all than to have ones that are unprofitable.  If you can’t accurately estimate the profitability of a celebrity, then how can you possibly bid any value that you know will be profitable if you win the bid?  You can’t.    That’s why the sales screen let’s you enter celebrity values to estimate their profitability.

Congratulations to all of the new Grand Champions for coming out on top of the rankings in the Invitational.

Lots of teams also played well and yet still came up a bit short in the scoring despite their efforts.  If you ended up with a profitable and well-managed company, then that’s an achievement too.

Many teams did poorly too.  Hopefully they can learn from their mistakes in the game to possibly help them in the business world at some point in the future.

If you’re competing in this Invitational, are you ready?  Are you sure?  Just because you won 1st place in your class game, that’s not necessarily sufficient preparation to do well in the Invitational.  Every single competition I observe many teams making huge, fundamental errors.  The only explanation for this that I can imagine is that some of these teams must have had very poor competition in their class games.  You don’t necessarily need much skill to win when the competition isn’t very good.

While there’s many poor teams in each invitational, there are also many excellent teams.  Which kind of team will you prove to be?  Much will depend on your dedication to put the time and effort into analysis and strategic moves starting in Year 11.  A few key mistakes can easily put you out of competition for the rest of the game.  Earning 1st place position in the early years is also not a very good predictor of success in the end.  Often the 1st place teams in Y11 have better earnings because they didn’t invest in capital improvements that make a huge difference in the final standings.

Good teams will have good results throughout the game, but not necessarily be in 1st place for the first 3-5 rounds.  It often takes time for a good game strategy to accelerate growth and earnings.

Important strategic moves are plant upgrades and plant expansion over a period of years using cost effective financing.  Interest rates can have a major impact on how quickly you can do these investments without the interest costs soaring.

Currency exchange rates have had a major impact on game play in the last few months.  There has been very large moves in these rates recently, and the game amplifies these moves by 5 times the actual differences.  A strong US dollar can kill the profitability in the Europe, Asia, and Latin America regions.  A weak dollar can likewise have the opposite effect, making these regions highly profitable.

With high interest rates and poor exchange rates, a more conservative growth strategy is more appropriate to this kind of bear market conditions.  Low interest rates and good exchange rates signal a bull market that’s ripe for expansion.  A mix of these indicators calls for a more balance growth strategy.   There is no single right strategy for every Invitational.  The teams that respond more effectively to market conditions and competition will have a major edge over other teams.  You can follow the market currency rates to know where they’re headed in advance of other teams that aren’t watching them.

Market conditions include the cost of materials.  There is no way to predict where these costs will head in Y12, since you don’t see the market prices until after they occur.  If all the teams shift to standard materials, then those prices will skyrocket.  A shift to superior material will have those prices escalate.  Choosing a balance of these materials (on a dollar cost basis) will minimize the risks of choosing the materials that increase the most.   You can choose to focus on one kind of material or another after you see what the industry as a whole is doing, based on the choices made by individual teams.

Good luck, but hopefully you won’t need to rely on luck when you use analysis as the basis for your strategic planning and decisions.

When new students start the Business Strategy Game, they often feel overwhelmed by the amount of decisions that are possible on all of the screens.  A very common mistake is for students to treat the game like a typical weekly homework assignment by spending only a few hours trying to learn the game.  This game is far too complex to be able to learn it well enough in a short amount of time.

Students also learn at different speeds and have trouble learning different aspects of the game.  Don’t underestimate the time that it could take to learn how it works.   You will not do well if you wait until the last minute to make the necessary decisions.  Players and teams who learn the game better will increase their chance of success tremendously.

In fact, one of the best ways to fall to the bottom of the rankings is to make no decisions at all, or possibly only focus on one limited aspect of the game such as celebrity bidding.

For best results, students need to learn the meaning and use of every value on every screen.  The values all matter to varying degrees.

Let’s say, for example, that a team decides to produce 100 models of shoes of 6 S/Q quality  in the Asia-Pacific factory.  It’s not too hard to get that result by simply increasing the amount of superior materials until the screen show 6 S/Q as the result.   However, it’s a MAJOR MISTAKE to think that you’re done with that screen because you achieved the production target you set.   That’s because there are literally millions of combinations of ways to achieve that result, each of which affects the cost of production and therefore the profitability.   Of all of those possibilities, there is only a very small number of combinations that are optimal, meaning that they produce the same goal for the least cost, the maximum amount of productivity, and the most benefit in the future for material savings through investment in technology improvements.

Learning how to optimize the production factors is fundamental to achieving the most profitability.  This is one key aspect of the BSG that takes hours for me to personally explain to students for them to understand how important optimization must be done well to succeed.   Production isn’t the only part of the game that requires optimization.  Distribution and marketing also require precise optimization.

The Invitational tournament has started and is currently mid-way through the game with year 15 results completed.

While some of the industries are rather competitive, there has been some, how shall I put it, “interesting” results in a few of them.   In one industry, every team was losing money except one, and that team was in first place with only 40 cents per share.   In other words, the industry as a whole had a negative EPS and ROE.

Many common mistakes abound such as overbidding on celebrities and over-expanding with poor credit.  It’s rather sad when the banks and celebrities are making more income from the shoe companies than they are earning for themselves.   Have these students learned nothing from their classes in economics, accounting, and finance?

Overbidding for celebrities is the most frequent cause for a team to immediately drop to last place in the following year.   Celebrities aren’t actually worth very much to any team in the first half of the game, where everyone has similar capacity with relatively low demand and production capacity.   Celebrity bids should be based on their actual marketing value to the company over the term of the contract, not based on outbidding other teams.

Students seem to overestimate the value of celebrities for some reason.  There have been many Grand Champions who have won the game without “winning” a single celebrity, such as when other teams are overbidding for the whole game.  Paying more than a celebrity is worth doesn’t help a team win in any way whatsoever.    If you don’t know how to figure what a celebrity is worth to your company, then DON’T BID.

Lots of games are in play at the moment.

It’s funny how so many teams make the same mistakes as others have been making over the last decade.  Here are some of the biggest mistakes that teams make.

#1 Overbidding on Celebrities.

This is what happens when you give people free money with no obvious consequences in an auction.  Since there’s no restriction placed on what teams can bid, all it takes is one team to bid highly and many other teams will start to follow in the year after, and that’s without any bidding war!!!   Two or more teams bidding against each other will often cause one of them to bid the max.   What they don’t see, at least not right away, are the consequences for overbidding.  Congratulations!  You just won a celebrity AND LAST PLACE WITH HUGE LOSSES!  Pat yourself on the back.  You just proved to everyone watching that you’re an idiot and a fool.

#2 Not Doing Anything

Lots of students are lazy.  They don’t plan to do any work if they don’t have to, particularly at the start of a semester.  This is soon reflected in many BSG games.   Usually there’s at least one team that entirely missed the deadline for decisions, saves decisions with no changes, or basically changes one or two insignificant values without really trying anything.   They think they are being “conservative.”  No, that’s just being lazy.   Why is it not conservative?  Because the company that they have been given to run has made several important mistakes in the past that could be corrected in the first year you make decisions, so when you fail to do so, it’s because you have no clue about the state of your own company and haven’t taken the time to understand it at all.   It’s easy to tell which teams these are.  They are the ones in Year 11 that still have a dividend around $10,000 ($10M) and long-term debt of $67,100 ($67.1M).  They probably don’t even know that they have inherited loans that should be refinanced, and they don’t know what dividends are, nor why they shouldn’t be paying out a lot of dividends when they should be reinvesting that cash in their own growth.   Small-cap growth companies don’t pay dividends and aren’t expected to pay them.  A good way to tell whether a company is managed by fools is when they pay out dividends with no good reason to do so.

#3  Doing All the Wrong Things

If you start this game by making a lot of decisions based on your preconceived notions on what’s good or bad for business, you’re gonna have a very bad time in this game.   This happens when students declare that they are going to be the “low price leader”, the “best quality producer”, the “best value seller”, or any other equally ridiculous declaration when they HAVEN”T EVEN BOTHERED TO LEARN HOW THE GAME ACTUALLY WORKS.  Nobody cares about your opinion besides you.  You probably have an overestimated opinion of yourself.   Anyone who first learns how the game works before declaring how they intend to play will have a much greater chance to destroy you in competition during the first year and every year thereafter.   FIRST, LEARN THE GAME.  Then your opinions have a better chance of being relevant, accurate, and useful.  Until then, you’re just another student with a wild-assed guess who thinks his/her opinion matters merely because they think so and said something.  No, you’re probably wrong, particularly when you have no valid reason to know whether your opinion is good or bad.

#4  Doing Some of the Right Things at the Wrong Times (usually the worst times).

There are millions of combinations of decisions that could be very good at one point in the game in the right situation, but these exact same decisions can be a disaster when done at the wrong time or in the wrong situation.  For example, customers do like to have many models of shoe to choose from in order to get ones that they like and that fit them.   If a company increases the number of models produced and sold to 500, then consumer demand will increase substantially, revenues will increase dramatically, and market share will increase dramatically.  That all sounds great, right?     What you’re missing is that you will lose a lot of money on every shoe you try to sell if you try to make 500 models in the first year.   Anybody can sell $20 bills for $10, until they run out of money doing it.   That’s a great deal for the buyers.  It’s a terrible deal for the seller, and it’s a recipe for guaranteed bankruptcy the more you sell and the longer you do it.   At a different time in the game, after you have invested in upgrades and expansion, you may very well be able to produce 500 models of shoes very profitably.   So making and selling lots of models can be a good thing at the right time, or a disaster at the wrong time.

#5 Doing Some of the Right Things While Doing Too Many of the Wrong Things.

This is probably the most common mistake that teams make.  They make a lot of different changes all at the same time without really knowing what they’re doing with any of them.  Basically, this is the WAG method – the wild-assed guess method of making changes just to “see what happens”.    This is basically about as effective as letting a monkey pound on a typewriter and hoping that something will come out that can be turned into a best selling novel with some editing.   The problem is that the results will usually be bad, but you made so many changes that you are equally clueless after the results as you were before you submitted the decisions.