BSG Tips Revisited: My Winning Strategy

So I've found out a few more tricks and refined some of the tricks that will teach you how to win your BSG strategy game. Some of the things are still the same as my previous post on BSG tips, but with some new insights. In this post, I'd actually like to walk you through the process that I go through in order to win.

Choose a Strategy

Like I said in the former post, in order to win you need to either have a high quality/low model or mid quality/high model strategy. I have seen the most success with high quality/low model strategies. This is because you can more easily make profits, which is the key of the game! If you focus on revenues or ending cash or market share, you'll lose. If you focus on profits, you'll win. Once you choose your strategy, stick with it. It will help you in the long run.

Corporate Citizenship

The first screen in on the decision page is corporate citizenship. It's mostly a waste of money. They give the Gold Star Award, but it doesn't do anything for you, except make you feel all warm and fuzzy inside. However, you can increase your Image Rating with some of the options. The key, as with the rest of game is to optimize. The choices that will best optimize your image rating are the Ethics Training, which you'll put on 'All Employees', and Workforce Diversity Program, which you'll put on 'Yes'. If you go any further than that, you're spending too much money and your costs will erode your revenues, thus decreasing your profits, which lowers your ROE, EPS, possibly your credit rating, and your stock price. If it lowers 3/5 of your grading criteria, how can you possibly win?

Playing the Game

The key to the game is optimization. In order to optimize, you need to toggle everything and see how it affects the percentage profit increase/decrease. You also need to know what your competition is going to do, mainly with what price they are going to charge. This is easy to do after the 3rd or 4th year. You can easily keep track of their price on an Excel Spreadsheet. A useful tool is the 'Adjust Competitive Intensity' button. If you click on that button in each market, you will see that in the center is an option to change the competitive rate. If you keep it at +2%, you will usually get optimal results. The most it will be is probably +4%. If you're keeping track of price changes, you can evaluate what percentage the following year will be by finding the percent increase/decrease in overall prices. Next, make sure you have the industry S/Q rating accurate. If it's wrong it will skew your optimization. Next, toggle everything. I always start with NA Price and work my way down the column. Your S/Q rating should be known, so you don't need to toggle that. If you're going for the high quality strategy, set you models sold to 50. Then, toggle advertising, rebate, retailer support (by 100s only), and set delivery time at 3 weeks.

After you've done that for each market, estimate the industry internet price. Models offered will probably be close enough to the actual number that you don't need to mess with that. Then, toggle your own internet price, set your models offered to 50, and No free shipping, unless it boosts your profits, which is highly unlikely. If you have inventory left from the prior year, see if clearing it will boost your profits. You'll have to toggle each percentage for each market. When that's done, write down your regional sales volume for internet and wholesale for each market. You'll use this later.

Plant Capacity

Decide your strategy for building plant capacity. My recommendation is to only build onto existing plants. This increases your learning curve and shoes cost less. Never sell your capacity. This is really stupid. You're always going to want the capacity that you have. Eventually, you'll want the S/Q upgrade if you're going with a high quality strategy or the Production Run Setup Reduction upgrade if you're going with a low quality strategy.

Branded Production

Here, you'll need to toggle the materials, features and TQM until you get the S/Q that you want. First, put best practices training to $5000. This gets you the best S/Q rating for your buck. It pays for itself and more. When toggling the materials, features, and TQM, it's usually the best to have your features maxed out at $50K. Play with the numbers, but that's usually the case. TQM will usually be best around $0.70 or $0.80. Again, play with the numbers. Find the combination that gets you the highest profit. When toggling the wages, always try reducing their pay first. Sometimes they're alright with it and you can increase profits. If not, increase their wage a percent at a time. Sometimes if you go up between 6 and 8, and sometimes up to 14 percent, you'll maximize profits. Do it for each region.

Figuring out the branded pairs needed is a complicated process. The numbers that you wrote down from the other screen are now needed. First, you multiply the wholesale expected demand by an increased percent, so by 1.15 -1.25. To start off, I recommend multiplying by 1.2. If you end up with a huge surplus of shoes, lower it a couple percent the next year. The projected demand that the computer shoots out is always wrong, except for internet demand, so do it this way. You'll then add the internet and new wholesale expected demand together for each region. That's going to be about how many shoes you sell in that region. Type that amount into the boxes for each region and then add the reject rate that it shows to that number. If you have to use overtime to achieve the number you got, do it. However, if you're having to use overtime, you'll want to increase your plant capacity the next year. You need those shoes for private label.

Branded Distribution

You'll want to ship all shoes going to NA and LA from your NA plant. That's because shipping from NA to LA does not have any tariffs due to NAFTA. You'll want to ship shoes going to EA and AP from your AP plant. If you are having to ship shoes from your AP plant to either NA or LA, you'll want to build plant capacity in NA. Type in the number that you wrote for each region on your paper into the boxes provided. Maker sure your shipping from the right plant.

Bids for Celebrities

This can be quite ridiculous. From the times that I have bid on celebrities other teams usually bid way too high. Some teams will get a ton of celebrities at ridiculous prices. I recommend putting in a low to medium bid, which is between $3,000 and $6,000. The most I would do is probably $8,000. Any more than that and I don't think it's worth the price of a celebrity. You can decide what's best for you though.

Private Label

This market is definitely one that you want to be involved in, unless you are the low price provider selling a ton of shoes. In that instance it may not be a money-maker. The most important thing here is to be a good estimator of what every other team is going to do, but also to produce the lowest cost shoe. This gives you a much better chance of being profitable. I recommend using all the remaining production capacity that you have to place in the private label market. So if you've got regular and overtime production available, use it. Then, allocate the amount to whichever markets you want. Look at the margin over direct costs in order to determine if that market will be profitable based on the price you are charging.

After allocating the shoes to a region, toggle the superior materials and styling features so that the price shown for production costs is the lowest it can possibly be. MAKE SURE YOU ARE MEETING THE S/Q RATING FOR THAT ROUND! If the required S/Q is 4, then you need to have a 4 S/Q. If you have a 3 S/Q, you won't sell one shoe. Another note is to price your shoes at least 5 dollars below the industry average wholesale price for the region. If it's above that price, you won't sell one shoe.

Some useful strategies are the following: 1) If no one is involved in the private label market, price your shoes as high as you can ($5 below the wholesale industry average). I usually put the price $6 below what I estimate the industry average will be to play it safe. 2) If the private label market is competitive, under-price everyone else. It will discourage others from entering because profits will be low. Obviously don't let your margin over direct costs go into the negative. Make sure you pay attention to tariffs and which regions will bring in the most profits. 3) Take all of the market share in each region or selected regions. This is done by under-pricing everyone else and maxing out the demand in a region. This can hurt other teams, discourage entry, and boost your profits.

Finance & Cash Flow

This is a great screen. Here you can pay off your outstanding debt, issue stock, repurchase stock, and give dividends to investors. Whenever I have enough cash, I like to pay off the debt. This increases your net income, thus increasing ROE, EPS, and stock price. I always issue a dividend, regardless of how small it starts out. I try to increase it as the game goes on. This will slightly raise your EPS and ROE. If you need money to purchase capacity, you can issue stock instead of taking out loans. If you have a low stock price, repurchasing stock is always good for raising EPS and ROE.

There you go! That's how I win BSG online. I'd appreciate any comments or other strategies that you've used that have been successful, as I'm sure there are many other strategies. I really like the high quality strategy because you can charge so much more per shoe and increase your profit margins, which is how you win the game. I suppose you could do the same thing for low price strategies, but you'd definitely have to sell a ton of shoes to get enough revenues to increase your profitability.

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