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Mikes Bikes

December 11, 2007

We just recently competed an interesting assignment in one of my classes out here, a business simulation called “Mikes Bikes” wherein you control a, well, cycle company, starting with only minimal operational control, and eventually having near complete autonomy regarding the business choices of the “company”. Once a week, in our case, we had a rollover where a simulated year passed with the choices we’d made standing and compared to the other businesses in our world (each “world” was composed of 5 teams).

We started off pretty awesome, keeping near the top for the first three rollovers or so, but we got a little ambitious and, well, destroyed the company. Just on the off chance that students suffering through the same assignment end up here, I’ll share what we learned.

Blowing a lot on marketing only works well if you have the production to keep up with it – and ordering more than you have the manufacturing capacity to produce gets very expensive, very fast. If you end up with a large amount of cash on hand in the early game, don’t put it all into marketing – look into expanding production. Or, hold onto it for the eventual launch of a second line of bikes.

Watch the prices your opponents set for their bikes – they often indicate their eventual move. If you see a lot of low prices and high-ish sales, it’s generally likely they won’t branch out into the “road bike” segment. Conversely, high prices and moderate sales rarely indicate a move towards “youth bikes”. If you are wanting to launch another line, launching the one that no one else is making is a great way to make a lot of money very fast.

Upgrading the mountain bike is awesome, but your price increase to match the R&D needs to be subtle – our ill-advised price jump of $200 pretty much killed our sales that rollover, and knocked us out of the game. If you’re stuck with a large surplus and want to flood the market, do it properly, and reduce the price as low as you dare – and it must be more than $50 below everyone else. Really. Otherwise your attempted flood just looks like an attempt at a price war, and you don’t unload that massive inventory of yours. If we’d known this after our price-jump error, we likely could have pulled our company back into reasonable levels, if not competitive ones with the other firms.

Finally, if you’re at UW and getting the course from Sproule “Spongebob”, killing your company won’t necessarily kill your mark. We rode ours to the ground, having a finishing share price of $0.71 , and still pulled a 90-something on our Mike’s Bikes mark. All you have to do is be able to right a good report, and throw everything into a “what we learned-” tone. Also. He won’t tell you, but document the hell out of your rollovers. Even write the report just after, if you can. Trust me, trying to remember the context of that one stupid decision from the start of the semester is a total bitch, and one that we would have well avoided if we’d just taken notes at the time.

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