MARGA Stories: What do you learn with the business simulation?
After the testround of the MARGA Online Competition the teams start with the qualification round. Still some questions are not answered yet:
- Do investments pay off last minute?
- Other teams have taken high risks and have been lapped by the competitors at the end, is it worth to take the risk?
- Sometimes those teams with extraordinary high market shares were not the most profitable ones, which strategy is the best?
- And sometimes the competition was very tough and no competitor was able to achieve high margins at all. Is it possible to gain high margins if the competitors go for low costs strategies?
Here we report on some of these 'MARGA stories':
"One team, six people on four continents and one decision to make - it is just great which possibilities we have today."
Finalist Anna-Lena Schulz, Volkswagen AG
Most of the MARGA team members are located in different places during their time as the MARGA management board. Some teams face the challenge to manage and lead their company through various continents and time zones. For example, if the board members live in Brazil, Germany, Russia and China, team sessions the MARGA webconferencing tool with all team members are rare and thus the teams need to coordinate themselves via e-mail or in smaller groups.
In fact, those teams which are not located at the same premise are yet very successful in the MARGA business simulation. They do not only invest time, but they also learn how to deal with conflicts and how to solve discussions over long distances, only via virtual communication. Every now and then, MARGA teams even meet and see each other for the first time at the MARGA final. Usually, during the course of the MARGA competition, all team members bond in such a way that they become friends. And to have friends in your company is the best way of networking.
Market shares versus profitability
At the beginning of the competition all four companies of a group start with 25 percent market shares in each market segment. Some teams only focus on increasing the market shares. They decrease prices and increase advertising budgets to attract new customers. By doing this, they often lose track of the profitability. What is the benefit of high sales volumes, if every sold product causes a loss? This case proved to be obvious during a team session again: Company 3 was the clear market leader, its overall market shares increased to nearly 40 percent. But at the end of the competition, the competitor which had low market shares but high profits was much more successful: company 2 was able to compensate high prices with a clear quality leadership.
Every MARGA participant works in a team as a management board of a virtual company with three different products. All products have specific attributes and are in different phases of their product-life-cycle. At the beginning of the simulation the participants usually focus on the product type (e. g. consumer product or service product) and neglect the product-life-cycle. During the simulation process most teams figure out that those who integrate the product-life-cycle of the products in their strategy usually invest more precisely and thus more efficient. But what does the product-life-cycle stand for? The product-life-cycle shows the changes of revenue and profit of a product dependent on time. During the growth phase for example other marketing tools are more effective than during the saturation phase, in which one cannot expect a high market growth. For example, during the saturation phase high investments in quality are rather unusual. To show the product-life-cycle and to compare the own company with those of the competitors, the portfolio analysis is helpful, which is integrated in the MARGA software. The participants can analyze their position in the different markets and thus can plan their strategical approach in a well-founded manner.