PARTICIPANT HANDBOOK

Gavin Fraser
Consultant

Blue Ocean Strategy Initiative Centre

Dr Rmi Triolet
Simulation Expert

StratX

HOW TO PRINT THE PDF VERSION OF THIS DOCUMENT

Paper is too valuable to waste. We advise you to think twice before
printing this document. The full text is available within the simulation,
with a search-engine to help you find the information you need. In
addition, context-sensitive help is available on all important forms, such as decision
forms.
Should you decide to print this document, we advise you to print two pages per sheet,
and, if your printer allows it, to print double-sided.
To print two pages per sheet, select Multiple pages per sheet in the Page scaling
choice box, and enter 2 in the cell below. To print double-sided, please refer to your
printer documentation.

Table of Content
1 Introduction to the BOSS Challenge ________________________________________________
1.1 Your Role _________________________________________________________________
1.2 Your objective ______________________________________________________________
1.3 Working in a team __________________________________________________________

1
1
2
2

2 The BOSS Application ___________________________________________________________

2.1 Starting and stopping a working session (log in and log off) __________________________
2.2 Activating your team ________________________________________________________
2.3 Navigating across result pages and decision forms _________________________________
2.4 Accessing decision forms _____________________________________________________
2.5 Submitting your team file for run _______________________________________________
2.6 Working in groups over several days ____________________________________________

3
3
4
4
4
4
5

3 The BOSS World ________________________________________________________________ 6

3.1 Introduction to the Market ___________________________________________________ 6
3.2 Key Competing Factors _______________________________________________________ 6
Price _______________________________________________________________________________ 6
Console Power (Sophistication of Gaming Experience) _______________________________________ 7
Graphics Sophistication ________________________________________________________________ 7
Controller Sophistication ______________________________________________________________ 7
Audio Sophistication __________________________________________________________________ 7
Multimedia Add-ons __________________________________________________________________ 7
Online Gaming _______________________________________________________________________ 7

3.3 The Current Customers of the Industry __________________________________________ 7

Segment 1: 6-21 Year Olds _____________________________________________________________ 8
Segment 2: 22-35 Year Olds ____________________________________________________________ 9
Segment 3: 36+ Year Olds ____________________________________________________________ 10

3.4 Distribution Channels _______________________________________________________ 10

Low Price-orientated Channels _________________________________________________________ 11
Specialized Electronics Stores __________________________________________________________ 11
Video Game Chains __________________________________________________________________ 11
Shopping Preferences ________________________________________________________________ 11

3.5 Marketing ________________________________________________________________ 11

3.6 The Competitors and their Offerings ___________________________________________ 12
Shiny Apples _______________________________________________________________________ 12
Purple Plums _______________________________________________________________________ 13
Yellow Bananas _____________________________________________________________________ 13
Blue Buddies _______________________________________________________________________ 14
Expected offering upgrades over the next 3 years _________________________________________ 14

3.7 Services and Delivery _______________________________________________________ 14

3.8 Introduction to the Blue Buddies Organization ___________________________________ 15
Kel Sharkland CEO _________________________________________________________________ 15
David Richter CFO __________________________________________________________________ 15
Sally Burley Marketing Director _______________________________________________________ 16
Rick Stark Operations Director________________________________________________________ 16
Barb Regan Sales Director ___________________________________________________________ 16

4 Registering on www.stratxsimulations.com ________________________________________ 17

Why register _______________________________________________________________________ 17
When register ______________________________________________________________________ 17
How to register _____________________________________________________________________ 17

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ii

Table of Figures
Figure 1 Running BOSS in three or four Rounds __________________________________ 1
Figure 2 Log in form ________________________________________________________ 3
Figure 3 Access rights form __________________________________________________ 5
Figure 4 Market size and growth rates over the last 4 years _________________________ 6
Figure 5 Size in volume and value of the three groups of existing customers ___________ 8
Figure 6 Size in volume and value of the three distribution channels _________________ 11
Figure 7 - Shopping preference by age band _____________________________________ 12
Figure 8 Sales & market shares by competitor __________________________________ 13
Figure 9 - Registering as a Participant ___________________________________________ 18
Figure 10 - Completing the registration form _____________________________________ 18

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June 25, 2014

iii

Introduction to the BOSS Challenge

1.1 Your Role

Welcome to Blue Ocean Strategy Simulation (BOSS) !
You and your team will take over the management of a fictitious company in the video game console
market. You will be leading the company over the next nine years, making key strategic decisions at the
beginning of each year. A computer model will simulate your performance during each year and you will be
able to see the results that you and your team has achieved as an outcome of your strategy!
The Magnavox Odyssey and the Atari Pong were the first home video game consoles marketed in the early
seventies. At that time, consoles were analog rather than digital, and they had rather simple graphics, poor
controller responsiveness and no sound! 40 years later, tremendous progress has been made and a handful
of competitors are engaged in a fierce battle to dominate this market.
This introduction to the BOSS world covers the main aspects of the current market, the customers, the
distribution channels, the existing offerings and the competitors. At the beginning of each Round there is
an additional introduction to provide you with more specific details about that Round.
The simulation starts in Year 40 of the video game console era. The nine years during which you lead the
organization from Year 41 to Year 49 are organized into four Rounds. A Round is broadly related to a
particular set of learning objectives. Within a Round you may have one or more years as shown on Figure 1
below.

Figure 1 Running BOSS in three or four Rounds

Each round presents you with new strategic challenges:

Round Red: Managing your existing offering for 3 years, using Competitive Strategy tools as a basis
for your decision making.
Round Blue 1: Creating a high value (differentiated and low cost) Blue Ocean Strategy product
offering, perhaps including competing factors beyond those on which the industry currently competes.
Round Blue 2: Unlocking further demand by determining the right Strategic Price and refining your
offering.
Round Blue 3: Extending your Blue Ocean Strategy by using Service and Delivery platforms as a basis
for creating uncontested market space, as well as dealing with the presence of new low-priced
competitors.
It will take you and your colleagues about 3 hours to complete each Round. Hence, the total exercise will
last around 15 to 20 hours if you include time for pre-reading and introductory/debriefing sessions.

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Your Instructor may decide to skip the Red Round since completing this Round is not mandatory to
understand the Blue Ocean Strategy concepts covered in Blue Rounds one to three. Similarly, he or she
may have decided to combine Round Blue-1 and Round Blue-2, as shown on Figure 1 above, to provide you
with a more condensed learning experience.

1.2 Your objective

Your objective over the next 9 years is to maximize the Share Price Index (SPI) of Blue Buddies, the fictitious
company that you will be managing. Your SPI takes into account several indicators including market share
and profits, as well as your ability to grow the organizations revenues and capabilities.

1.3 Working in a team

It is helpful to establish a good working relationship within your team. It is strongly recommended that
each team member be involved in all discussions in order for everyone to have the same understanding of
the business situation. Try to avoid letting each member concentrate solely on his/her area of professional
expertise.
As the simulation evolves, your team will develop a common understanding of the strategic issues. In
parallel, the management of the organization will become increasingly complex. At some stage, team
members may begin refocusing on a specific area of responsibility.
By following this process, not only will you maximize your internal resources, but also ensure that everyone
benefits equally from the BOSS experience and key learnings.

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The BOSS Application

Your work on the BOSS application will follow a decision-making cycle that will repeat itself for each
simulated year, i.e. 9 times in total.
1. At the beginning of each year, you and your team will receive your Annual Report and a series of
Market Studies which cover the previous years activities. In the first year, you should first analyze this
information and then start formulating a strategy for the Blue Buddies organization and agree on
objectives.
In the subsequent years, you should appraise your results, check if you have met your objectives and
possibly review your initial strategy and decide on what changes should or should not be made.
2. The previous step will lead to a series of decisions, which will be input into the decision forms provided.
3. You will then submit your decisions to the BOSS software that will compile the data and generate the
results of the year in question. At this stage, you are ready to start a new cycle.

2.1 Starting and stopping a working session (log in and log off)
BOSS is an easy-to-use web-based platform which needs no prior computer skills or expertise. There is no
software to install on your computer; all you need in a web browser such as Internet Explorer, Safari,
Firefox or Chrome.
The use of BOSS is strictly reserved to participants who have a valid Participant Activation Key (PAK) and
who have registered on www.stratxsimulations.com. If you have not yet obtained a PAK or have not yet
registered, we advise you to do it now. Please refer to section 4 at the end of this document for
explanations on how to register.
You will need four pieces of information to log in BOSS, as shown in the table below together with
examples.

PAK
BNP-4GSV2

COURSE ID
B07528

TEAM NAME
Viper

TEAM PASSWORD
9751

The last three elements will be given to you by your instructor. If this has not yet been done, please contact
him or her.
You will have to log in BOSS each time you want to review your latest simulation results and/or make
decisions. To log in, go to www.stratxsimulations.com and follow the instructions below.
Click the Login link at the top-left corner of the page and select A Participant in the You are drop-down
box.
Enter your PAK and click the Submit button.
You may now click the Access BOSS WEB button on the home page and start your BOSS working
session

Figure 2 Log in form

If you have started a working session and wish to stop it, just close the BOSS application by clicking the Log
off button in the top-right corner.

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2.2 Activating your team

Your team must be activated before you can use the simulation. Indeed, you will not be able to make
decisions until your team is activated. Other operations will be allowed: viewing or printing reports and
reading or printing the documentation.
Your team will be automatically activated as soon as all members of the team have logged in BOSS at least
one time, using a valid Participant Activation Key. Refer to section 2.1 for log in instructions.

2.3 Navigating across result pages and decision forms

The BOSS screen is divided into two parts: the left-hand side of the screen represents your navigation menu
and the right-hand side of the screen displays the information that corresponds to the selected navigation
menu.
A dozen result charts are available in the two sections REVIEW ANNUAL REPORT and ANALYZE MARKET
STUDIES. Data from the previous years may be accessed in all charts; moreover, some charts allow you to
zoom in a specific customer group or channel. All charts may be printed or exported in multiple formats
including PDF and Excel.
Documentation is available in the READ GUIDES section. Documents are available in html format with a
search engine to help you find the information you need. They are also available in a printer-friendly
format; please refer to the cover page to learn how to save paper.
Decision forms are available in the section INPUT DECISIONS section. Decisions will be discussed in length
in the Introduction for Round Red as well as in the Introduction to Round Blue-1.
Finally, your remaining investment budget for each round is permanently displayed at the bottom left hand
side of the screen.

2.4 Accessing decision forms

You and your teammates may work in parallel in the BOSS application, each using his or her computer.
However, in order to avoid confusing and/or conflicting decisions, only one of you will be authorized to
make decisions at a given point in time.
The first teammate entering the decision menu has the exclusive access to decisions. The other teammates
may browse the report, the market studies or the documentation. Decisions will become available to the
other teammates when the first one navigates outside the decision menu or logs out the simulation.
If you click on the decision menu while another teammate has the exclusive access, you will be
automatically routed to the Access Rights page, depicted in Figure 3. In this page, you have the option to
reclaim the exclusive access to decisions. Beware, if you choose this option, the teammate currently making
decisions will be kicked out of the decision forms. Make sure that he or she is finished with decisions before
reclaiming the access to decisions.

2.5 Submitting your team file for run

You need to submit your decisions for run when you are finished with your decisions and want to start the
next period of decisions. You can submit you decisions to the BOSS simulator only when your decisions are
error-free and only if your team is activated (see section 0 to learn how to activate your team).
Click the Run button in the top-right corner; a confirmation message pops up. If you confirm the operation,
the simulation model will be applied to your decisions. Fresh data will be generated, corresponding to the
new market situation. Please note that this operation cannot be cancelled. Thus, do not submit for run
until you and your teammates have made the best decisions possible. After the run, you may start a new
decision cycle.
The mathematical model of BOSS has been designed by a team comprising experts in simulation as well as
experts in Blue Ocean Strategy theory. The model provides a good representation of the video game
console market and of its consumers, competitors, distribution channels, etc. The BOSS model has been
calibrated to reinforce learning; hence, it may not always behave as the real world does. For instance, the

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model has been designed to underreact to poor decisions; you will not go bankrupt even if you make really
bad decisions. Similarly, the model has been designed to overreact to excellent decisions; if you design an
excellent Blue Ocean offering, your profits will increase exponentially. Finally, the representation of time is
somewhat condensed in BOSS. For example, whilst it may take 5 years or more for an excellent Blue Ocean
offering to be imitated at scale in the real world (depending on the industry), it will only take 3 years in
BOSS.

2.6 Working in groups over several days

Within each Decision Round, you and your teammates may choose to organize several working sessions
with the BOSS application. You can make a detailed analysis of your results on day 1, make Product
Upgrade and Production Plan decisions on day 2, make Marketing Budget and Segmentation Strategy
decisions on day 3 and finalize everything on day 4.
You may make decisions all together or choose to assign responsibilities (Development, Production,
Marketing, Distribution, ) to team members and to work remotely from different computers. In the later
case, you should work in a sequential manner and not in parallel, otherwise you risk losing decisions which
have already been taken. Each team member should get the exclusive access to decisions in turn, and make
his or her decisions that will be saved centrally on the servers. The next team member will then add his/her
own decisions, and so on until all members have entered their decisions.
If you are all located in the same geographical area, we advise you to perform a final check of your
decisions all together before submitting your decisions. Alternatively, you may nominate a Team Captain
who will be in charge of this final check as well as of submitting the decisions.

Figure 3 Access rights form

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The BOSS World

3.1 Introduction to the Market

There are two broad geographic markets similar to continents: Roundland and Starland.
Roundland has a population of 125 million and resembles North America. Roundland is the home
country of all the major competitors in the market and is thus the market where new offerings are
launched first.
Starland is about the same size as Roundland, with a population of 130 million, and is similar to Europe,
with multiple languages and countries. Investment in geographic expansion into the Starland market is
financially rewarding, although it requires more investment since each market has its own cultural and
business idiosyncrasies.
The total video gaming market consists of hardware (the video game consoles) and software (the video
games themselves). Hardware and software each account for about 50 % of the total market.
Today, the current video console market is worth $4.2 billion annually. Annual sales peaked at $4.5 billion
5 years ago, but unfortunately the market has been in decline since then, as shown on Figure 4 below.
However, the market is still moderately growing in volume, by about 2% annually
The household penetration of video game consoles in Roundland and Starland is about 53% - so, over half
the homes in the market have at least one video game console, and many have more than three! These
have accumulated in households over many years, as each console is replaced by a more powerful and
sophisticated one as the industry drives relentlessly to exploit the exponential technological improvements
within the broader computer and electronic entertainment device industries.

Figure 4 Market size and growth rates over the last 4 years

The video games industry has been through peaks and valleys in the past. What creates a new peak is
mostly the long-awaited launch of ever more powerful and sophisticated gaming consoles. Technological
novelty and sophistication is a strong driver of consumption in the industry, especially amongst the core
customer group. Once they mobilize behind an offering, the rest of the industrys customers follow suit.

3.2 Key Competing Factors

This section explains the competing factors which are most important to customers (and thus competitors)
in the Red Ocean.
Price
The current prices for the four competitors' game consoles vary between $300 and $660. The allowable
price range for your decisions within the game is from $100 to $660 per console.

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Console Power (Sophistication of Gaming Experience)

This factor is measured in GHz (Gigahertz), referring to the speed of the main processor which drives the
visual and audio experience, and the ability of the controller to direct many different tasks almost
simultaneously. Console power varies between 2 and 10 GHz.
Graphics Sophistication
This is measured in Mbytes and is accountable for the degree of lifelike movement and scene-setting within
the virtual world, as well as the number of colors and the ability to adapt to screens of varying size and/or
the ability to run the game on multiple screens. Graphics Sophistication ranges between 32 and 288
Mbytes.
Controller Sophistication
Controller sophistication refers to the number of buttons on the controller, whether it is wireless or not
and whether the controller is able or not to recreate the sense of touch by applying forces, vibrations, or
motions to the user (also called haptic capabilities), such as a shaking or rumble function in the game
controller. Controller sophistication is measured on an index from 4 to 20 and is largely driven by the
number of buttons on a controller. Beyond this, a haptic device raises the index by 2 points, as does having
a wireless connection between the controller and the console.
Audio Sophistication
Audio sophistication refers both to the clarity and richness of the sound as well as to the number of
channels it supports. It is measured on an index from 1 to 9. The index at level 1 represents mono sound.
At level 2 it represents stereo sound. At level 3 it represents stereo with early generation Dolby sound
enrichment and clarity. From level 4, sophistication increases as channels increase to four and then to 5.1
(including a subwoofer), 6.1, 7.1 and finally 10.2 for the extremely sophisticated home cinema with twelve
speakers. Similarly, as the number of channels increases, the sound enrichment progresses from early
Dolby enhancement up to DTS-HD, true high definition sound.
Multimedia Add-ons
Over and above the basic gaming capability of a console, various other entertainment devices may be
included within the console unit, or connections are available so that customers can connect the gaming
console to other devices (e.g. HD television screens) as well as to the internet via a wireless or wired
connection. This competing factor is thus measured on an index from 1 to 9, where 1 is no other devices
other than the gaming console itself. As the index increases, it becomes possible to play CDs, DVDs or BluRays, to interact with an MP3 player (copying and playing music), to store information on a hard drive or
flash drive (for saving movies purchased off of the internet) and even have an HD (high definition) or 3D
video playing device.
Online Gaming
This factor encompasses the speed of access to the gaming environment and the ability of the gaming
environment to cope with multiples users, as well as the quality of the games and the quality of the
interaction with other players. This is measured on an index which ranges from 10 (low) to 90 (high).

3.3 The Current Customers of the Industry

The core customer group is about 20% of the total available market. Currently it is split approximately
63:37 male:female.
Most customers fall into the 10-45 age bracket, 45% of these under the age of 21. However, the market
has been aging as young gamers in the 1980s are now wealthy and are able to pay for an improved gaming
experience in terms of game complexity, visual definition, realism and sound quality gaming is part of the
relaxation at the end of a hard days work. These customers are also willing and able to buy consoles for
their children.
The core customer group is very internet-savvy and enjoys playing within the recently available online
gaming communities. They are able to meet with and play with or against other gaming enthusiasts from
all over the cyber world at any time of day or night.
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The one thing that customers do complain about is the lack of availability of really good games. The
majority of available titles style the gamer as a person with weapons, life credits and sets of tasks to
perform to progress from one level to the next in the game. The task is to avoid being damaged or killed
while solving how to progress to the next level of the game. This can involve much repetition however a
recent survey revealed that, for some customers, the repetitive nature of button-pressing and repetition of
actions at any one level in the game provides a soothing effect on the player.
The hand-held controllers have become more and more sophisticated, with many buttons located on their
different faces usually more buttons than the fingers on both hands. The attraction and complexity of a
game are partly dependent upon all of the functions that these buttons offer and how game programmers
are able to use the consoles control language to exploit all the options that the buttons offer.
The market is divided into three major groups of customers, or segments, each having similar needs and
purchasing behavior. The major defining demographic of each segment is age.
The sizes of these groups (in volume and value) are given below, and a detailed description of each group
follows.

Figure 5 Size in volume and value of the three groups of existing customers

Segment 1: 6-21 Year Olds

This segment accounts for about 45% of the market by volume. The first expensive gift that a pre-ten-yearold is likely to receive is a video game console. Hours spent in front of the screen give hard-working
caregivers relief from having to provide constant supervision.
As this segment ages, it enjoys video gaming as a way to escape from teenage and post-teenage
relationship and development issues. They mostly live at home and the video gaming world is a world to
which they can escape and over which they feel they have control.
These gamers can take on the persona of the people they play in the game, for as long as the game
endures. Although they may not always win, they win in the end. They have the free time and the drive to
progress through all of the avenues and challenges that a game offers. While this segment used to be
dominated by boys, the gender split is fast approaching 50:50.
For this segment, price is the most important purchase driver. It may take them or their parents a while to
save up to buy a video gaming console. Alternatively, they may have to wait for their birthdays or another
celebratory holiday before they receive a gaming console. They will avidly shop and be aware of the best
deals. They usually buy the basic bundled package, which may include one or two free games.
The console power is important but not paramount. This segment loves to play online, where the lack of
sophisticated games requiring high speed processors does not interfere with the quality of their gaming
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experience. The same applies to the graphics sophistication. Often they are viewing the game on older
generation televisions (family cast-offs). As long as they can see what they are doing, they are fine,
regardless of how small or blurry the screen might be. Even though the world they view may not be a close
representation of reality, it is a big step up from childrens story books where the characters do not move
and where there are no sound effects.
The controller is a different matter. Long before they are able to drive a motor vehicle, these players enjoy
developing the reflex reactions of jet pilots. Mastering the complexity of the controllers is a right of
passage which, when achieved, denotes assured status within their peer group. They are not daunted by
sophisticated controllers and they enjoy developing the skill to master them. They will even opt for wireless
controllers or sophisticated haptic devices, as long as the total price remains within their budget.
Audio sophistication is not a strong need for this group. Since they live at home, they cannot make too
much noise without disturbing others in the house (parents or younger siblings).
Their interest in multimedia add-one is limited to internet connectivity and the ability to play music. Other,
more sophisticated features are available at home, using their parents equipment.
The online gaming experience is of utmost importance to this group. They may be latch-key kids or from
families where they are the only child (a growing trend in the developed world) and so the availability of
many friends in cyberspace is appealing. After school, they enjoy meeting their friends in a virtual
gaming world and using the messaging capability to send joking messages. The internet games they play
are available for free or for a nominal monthly fee that is usually well within their financial allowance.
Segment 2: 22-35 Year Olds
This segment accounts for about 35% of the market. They live in a world where they are beginning their
careers and have more disposable income. Many still live at home, but a larger majority share low cost
student type accommodations with friends of their own age group. With few claims on their time and
income, they are able to spend as much time as they want playing games as a kind of stress reducer from
the combined tension and (possible) boredom of their first jobs. The gender split of girls to boys is 30:70.
Price is not as important to this segment as it is for the younger one, and they are willing to spend money
on a quality console, especially if the console has other multi-media add-ons; this saves them from having
to buy a DVD player, a CD player and a media box separately.
One of the most important drivers of choice for this segment is the console power, i.e. the sophistication of
the gaming experience. After having grown up in the video gaming age, they are not interested in retro as
far as technology goes! They want faster, better, and more complicated. Their minds have been weaned
on gaming strategies, and the more complicated and quicker the gaming environment, the better.
However, they are not as demanding on the graphics front. Although the appeal of very lifelike scenarios is
big, often they are as yet unable to afford a display device (e.g. a medium-to-large LCD or Plasma television)
to match the sophistication of the graphics that their console produces.
The controller, however, is quite important to them. The more sophisticated the controller, the better.
Sophistication is offered through the number of buttons and the way the functionality of these buttons
changes at different phases of the game. The best controllers are also wireless, enabling the gamer to
roam freely around a room or studio apartment while being able to game constantly stand up, shoot
monster, open fridge, shoot baddy, open drink, shoot monster, pour drink, shoot baddy, sit down, shoot
monster. Haptic controllers are appealing to this group but not a must.
Audio sophistication is not a primary driver of choice for this segment, since they have limited space, live in
dense accommodation and have to try and be considerate to others. They may well use headphones in
which case stereo sound is sufficient. When the cost of a good home cinema speaker system drops well
below $100, this segment will buy one and they would like their gaming console to be able to offer a great
sound.
Multi-media add-ons are very important for this group. If their gaming console doubles as a CD player
(together with the ability to download songs to their MP3 player) and a DVD and/or Blu-Ray player, along
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with providing internet connectivity and the ability to stream videos from the internet, then they are quite
happy. A few from this segment may require an HD player however, this is not a paramount
requirement.
Online gaming is moderately important to his group. They may have moved to another town, or moved
away from their friends and familiar neighborhood, and so the virtual community becomes their new
extended network of family and friends.
Segment 3: 36+ Year Olds
This segment accounts for about 25% of the market. They are the aging gamers who grew up with the
industry. They refuse to grow old and remember those bygone times when all they had to answer to were
themselves. These gamers may have families and much more disposable income to spend on toys. They
already have, or aspire to have, a home cinema system. This segment is predominantly male, with the
gender split being 85:15 men to women.
This segment is not price sensitive at all. Since they are working hard and spending most of their earnings
on their family, buying something for themselves for once feels justified. They are looking for something
good, not a bargain.
They are willing to pay, and so the sophistication of the gaming experience is important to them. However,
the most important thing for them is the sophistication of the graphics. Visual appeal is everything to this
segment. The gaming console must match the performance of their high-end Blu-Ray and HD or 3D video
players. Scenarios must have depth and accurate visual detail, and the movement of the characters must
be smooth and realistic.
Controller sophistication is not particularly important for this segment. They found the controllers they
learned on (some 25 years earlier) to be quite adequate for their needs and, with so much else happening
in their lives, they appreciate the simplicity and familiarity of these.
Audio sophistication is very important. Since games are using better and better sound effects to mimic
dramatic explosions, often with surround sound echoes, being able to reproduce this in a home cinema is
very important. This segment has spent the money on a good sound system and now they want to make it
pay for itself!
This segment is not at all driven by game consoles with multiple multimedia add-ons. In fact, the standalone equipment which they have is far more sophisticated than any available on a gaming console. All
they want is the game player itself they are indifferent to the rest of the multi-media capability and will
never use it.
Online gaming was never part of their gaming experience when they grew up, although they are now
relatively sophisticated internet users. However, their internet usage is not socially driven, apart from the
few e-mails to family and distant friends. They use the internet to buy and sometimes sell goods and
services. Their interest in online gaming is very low, but it is increasing slowly.

3.4 Distribution Channels

Most sales arise through three main channels. The sizes in volume and value of these three channels are
given in Figure 3.
Sales force expenditures for each competitor are determined by the extent to which their strategy focuses
on developing and maintaining one, two or all three of these distribution channels, as well as their
investment in geographic expansion within Roundland and Starland.
A detailed description of each channel is given in the next sections.

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10

Figure 6 Size in volume and value of the three distribution channels

Low Price-orientated Channels

These stores sell a very wide variety of goods and services. Examples are hypermarkets, catalog companies,
online electronics stores and auction sites. Service is virtually non-existent, although most distributors will
exchange faulty goods immediately as a matter of policy. No advice or guidance is given at the point of
sale. Many price deals are done, and only the most basic game console packages are offered in summary:
limited variety at a great price.
Specialized Electronics Stores
These sell electronic and computing goods such as televisions, computers, printers, MP3 players, DVD
players, cameras of all types and some domestic appliances. These are either independent distributors
who have only one shop or a number of shops in a particular region, or major multiples which have national
brand presence and store footprint. They mostly offer a limited number of bundled packages i.e., a
combination of console, number and types of controllers (wireless, haptic) and free or discounted games.
Video Game Chains
These include distributors dedicated to selling consoles and games, as well as some distributors which focus
broadly on home entertainment products such as pre-recorded CDs and DVDs. There are no national
brands here, although some do cover multiple regions. They tend to carry the most extensive range of
gaming console bundles from low end to high deluxe which include multiple wireless controllers, many
discounted games and many multimedia add-ons. All items are sold separately as well (i.e. not only in
bundles). These distributors also sell accessories and games. They have a strong relationship with
customers, including loyalty cards for discounts. They offer second hand games at lower prices and pass on
tips to customers regarding how to get the best out of the games.
Shopping Preferences
Figure 7 shows the shopping preferences of each segment for each channel. For example, 20% of the 22-35
Year Olds will usually shop in Low Price-Oriented Channels, but the majority of them prefer to shop in
Video Game chains.

3.5 Marketing
Not unexpectedly, all competitors spend a significant amount of money on marketing, investing their
budgets strategically to target each of the three major customer segments. The majority of the marketing
budgets are used to buy advertising space in a variety of media, including television, the internet,
billboards, and the press.

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Figure 7 - Shopping preference by age band

3.6 The Competitors and their Offerings

Four well-known organizations compete fiercely with one another for a share of the gaming industry
market. They are: Shiny Apples, Purple Plums, Yellow Bananas and Blue Buddies.
Blue Buddies is the firm that you and your teammates will manage.
Each competitor fights with the others in a bid to amaze the industry gurus and journalists with the
technological sophistication of their offerings. The gurus and journalists have the ability to make or break
an offerings success. Industry magazines are dominated by speculation concerning the fascinating
technological capabilities of potential future offerings.
An organizations market leadership in terms of market share can easily be lost to a competitor through
the launch of a new generation of technology by the latter, leading to a step change in market share.
However it can take years to recover the hundreds of millions invested in developing new technology, and
often hardware sales need to be subsidized for a while by software sales. Thus, although it is a large
industry, making a good profit or even growing profits remains a daily struggle.
The sales and market shares in volume and value of the four competitors are given in Figure 5 below, and a
detailed description of each organization is given in the sections which follow.
Shiny Apples
The current market leader, Shiny Apples, is the gaming division of a huge group specialized in electronic
products for the consumer and professional markets. This division is still enjoying steady sales from the
buzz created by the Shiny Station, its new generation console launched 2 years ago. Being part of a group is
a big advantage for Shiny Apples as it shares a renowned R&D department with the other divisions. This
console features the fastest chip in the business, which apparently cost hundreds of millions dollars to
develop. It is by far the most powerful processor in the gaming market. Shiny Apples takes great pride in
the fact that game developers prefer to develop games using their proprietary software than that of other
manufacturers, not only because it is simple, but because the graphics capability is so superb, allowing the
imagination of developers to reach beyond anything conceivable in the industry even half a decade before.
Their controller is uniquely sophisticated in that it has an extra button under the base the blast/jump
button. Gamers can ram this button onto their knees or stomach (if lying down) to generate a particularly
massive attack after earning the points to do so, of course. Shiny Apples sound engineers had worked
with a specialist sound group which had just won major awards for its contribution to the latest animated
Hollywood blockbuster. They believed that the quality of sound that the console could produce was better
than some top end receivers. The console was also richly endowed with connections the first HDMI
connection in the industry, four controller slots and an option to extend controller slots further. There
were two USB 3 ports (for any MP3 players and cameras) and an Ethernet LAN port. There was also a
component and two SCART connection points as well as the 7.1 sound connection ports. The console no

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longer resembled the small machines that characterized the industry 5 years before. It was a veritable
technological marvel. It had a 500 GB hard drive for future downloading of movies off of the internet.
At a price tag of $649 a console it was rated as well worth the buy for the great quality gaming it offered.
Shiny Apples strategy was to supply the best machine it left the development of the online community to
its main developers. The talk in the industry was that this was Shiny Apples Achilles heal other
competitors had exploited this factor to try and differentiate themselves given Shiny Apples awesome
technological capabilities.

Figure 8 Sales & market shares by competitor

Purple Plums
The next major competitor is Purple Plums. It is a spin-off from a major computer manufacturer. The
management team hired some experts from the consumer electronics and gaming industries to create a
new powerhouse in the gaming industry. The press calls Purple Plums little Shiny Apples since their
console, the Purple Player, is very similar to the Shiny Station, with not quite the same sophistication as the
industrys flagship device. However, at $100 less per console, savvy customers believe they are getting all
they need at a great price.
Unkind observers believed that Purple Plums merely imitates Shiny Apples, thus avoiding the high
development costs spent by Shiny Apples executive team (Shiny Apples was rumored to be having financial
difficulties). Purple Plums defends its reputation by saying that its main strategic focus was the online
gaming experience. To support this, it has a broadband wireless link built into its console rather than the
Ethernet LAN connection in Shiny Apples console.
Yellow Bananas
The smallest competitor, Yellow Bananas, provides its console, named the Yellow Console, as a link to a PC
or a laptop via a high speed USB 2 link. A new version was launched in Year 40 with major improvements in
console power and graphics. The controller is the least sophisticated in the business, a variation of the old
PC joystick.
The Yellow Console relies on the graphics card in the PC as well as the PCs sound card. While the graphics
sophistication is probably below the average expectations of potential customers, and the sound depends
on the sound resources of the customers home PC, it is the online gaming experience which really sets
Yellow Bananas apart from the competitors.
The games are bought and downloaded online and it is easy to try new games, or buy them at very low cost
for a week or two. Yellow Bananas went this route since it believes that gamers would find it easier to
interact online through an already familiar system the home PC. The Yellow Bananas console also plays
CDs and DVDs and some customers like the ability to copy CDs in real time from the Yellow Bananas player
onto their PCs CD burner. The current console price is $309.
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Blue Buddies
The firm which you and your teammates will manage is Blue Buddies. It is the second player in the market
in terms of market share. The Red Box, your current offering, is a generation behind that of Shiny Apples
and Purple Plums from a technology point of view. Recent internal difficulties and uncertainties regarding
the future of the market have delayed the design and development and launch of the new console.
However, the research laboratories, designers and production staff are enthusiastic and ready to create
Blue Buddies new console or to upgrade the existing one.
The Red Box was very successful when first launched, so much so that it really defined the markets
expectations, and continues to do so. However, the leap in performance of the graphic, sound and gaming
capability of the Shiny Station and the Purple Player have made the Red Box seem like a decade old.
Furthermore, when it was launched, MP3 players were not yet mainstream, and nor were DVDs. Thus, it
only plays the game CDs for which it is designed. Blue Buddies had such success with its technology
development in years gone by that it failed to invest sufficiently in its online games and, apart from a few
primitive online games, it was not as well-placed as its rivals in the online gaming world. The current price
of the game console is $ 399.
Expected offering upgrades over the next 3 years
Blue Buddies and its three competitors are likely to continue their relentless technology race over the next
few years. All competitors are expected to upgrade their existing offering while simultaneously decreasing
their price.
The chart below summarizes all the announcements that have been made in the past few weeks.

Expected Date
New features
announced
Pricing trends

Shiny Station
Year 42
Major improvements in
console power, graphics and
audio sophistication as well
as multimedia add-ons.
$650 $620

Purple Player
Year 41

Yellow Console
Year 44

Major improvements in
console power and controller
sophistication

Major improvements in audio

sophistication

$580 $500

$320 $250

3.7 Services and Delivery

The industry competes primarily on product differentiation and price, rather than on service and delivery
differentiation, with the exception of the comments on the quality of online gaming experience discussed
above.
Virtually the same strategy is followed for delivery. Manufacturers regularly subsidize deals and
promotions (price discounting) to increase sales volumes. In addition, game consoles, accessories and
games are bundled in packages where a small financial incentive exists for customers to buy them all
together. Additionally, manufacturers do contribute towards the training expenses of the salespersons.
A similar convergence of strategy amongst the main players in the industry exists for services. The length
of warranties (one year) is a standard for the industry and extended warranties can be purchased. Since
Yellow Bananas first introduced a loyalty and reward card system, the other competitors followed suite.
The operation and reward system for the loyalty cards is virtually identical.
Manufacturers also offer accidental damage insurance for an extra charge, except where distributors have
a scheme of their own on offer. This is because they believe that making a move into the financial services
industry is quite lucrative.
Finally, all manufacturers offer an average level of online support to their customer, with a contact center
(not opened 24/7/365), live webchat, e-mail help and a database of FAQs accessible through a search
engine.

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3.8 Introduction to the Blue Buddies Organization

Blue Buddies was originally a family business and the Dexter family is still the largest single shareholder
even though their shareholding is under 5%. Their presence on the Board is largely honorary now. Frank
Dexter was a solid state physics graduate who specialized in the development of hard drive storage and
access protocols. Both his son and nephew, best friends from their earliest years, had graduated with
majors in mathematics and physics respectively. These two, Marc and Stephen, were among the earliest
gamers and had a vision for the industry. They built the company into a profitable and successful one and
largely liquidated their shareholding in the mid-25s.
The organization still holds strongly to the values of fairness, integrity and innovation that the original
founders had. Blue Buddies appears to new employees as an organization which can achieve good
outcomes but can be rather sloppy and unsystematic in the way that it got there: it marches to its own
drum. In the past, new console launches have been delayed by up to 6 months. When it has mastered
something as an organization, it can be quite good at ongoing execution. However, when it needs to do
something quite different from business as usual it struggles. It lacks a project management discipline
which is usually taken for granted in most organizations in the technology industry.
Blue Buddies employs over 5,500 staff. 85% are in the Roundland continent, the majority being located in
three factory sites linked to distribution hubs East Coast, Mid-Continent and West Coast. Head office
consists of 500 people, and the Research Centre 800 people. The remaining Roundland employees are in
Sales, spread across the Roundland continent. The 825 employees located in the Starland continent are
mainly in Sales with some minor local support functions.

Kel Sharkland CEO

Kel has been with Blue Buddies for 15 years, previously playing the role of
marketing manager. An enthusiastic gamer himself, he is often on the front cover
of industry magazines and always willing to give opinions on the industry to
journalists, many of whom he would count as his personal friends.
His office wall is lined with trophies and citations awarded at the annual video
gaming awards ceremony held in mid-January every year just after the high
winter sales period. Kel is a capable businessman and manages to keep the profits of Blue Buddies steady
when those of competitors have been declining, although even he has been unable to stem the downward
trend in profits experienced over the last 3 quarters. He has given his word that he will remain at the helm
of Blue Buddies for as long as the shareholders still need him. It is well known that he is privately very
wealthy and wishes to spend more time fishing.

David Richter CFO

David has only been with Blue Buddies for 6 months. He was previously a partner
in a medium-sized accounting firm and had long wanted the chance to be part of an
organization with tangible products and services. An active and sophisticated
gamer himself, he leapt at the chance to join Blue Buddies when he noted the
position advertised in a gaming industry magazine.
David has become increasingly concerned by the drop in unit sales, although he
realizes that this is mostly due to the trend in the industry overall. He believes that
what the industry needs most is novelty, a new technological breakthrough which will wow customers to
such an extent that they will be happy to replace their existing consoles, as they have done for each new
generation of gaming console in the past.

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Sally Burley Marketing Director

Sally is a well known figure in the video gaming world. She began her career in
marketing at a renowned consumer goods organization. After a thorough training
in marketing, she made an industry switch to become the managerial assistant to
Stephen Dexter. She is an avid gamer and extremely knowledgeable about the
industry and its customers, and is deeply respected for this knowledge within Blue
Buddies and the industry. She was the first person in the industry to accurately
segment the market and to point out that gamers now ranged from under ten to
over 40 and comprised 3 separate demographic and psychographic groups. Many
of the competitors had adopted her classifications of the different customer segments. She had
encouraged the other major players to subscribe to a panel which collected and distributed monthly
information on certain vital customer purchasing and usage patterns. She is a popular conference speaker,
often headlining industry events.

Rick Stark Operations Director

Rick has been with Blue Buddies for over 20 years, longer than Kel who he
remembers inducting into the organization all those years ago. Rick is a real
devotee to the gaming industry. At home he has installed an impressive home
cinema, complete with 7.1 surround sound and a $25,000 projector. When the
Blue Buddies research laboratories want to test their latest graphics and sound
systems, Rick is their number one test customer if he likes it, it will be good
enough for anyone in the market. Rick has seen the market develop from the first colored blocks moving
on a screen to the massively impressive and realistic 3D pictures and great sound being offered today.
After an early career in the mail distribution center and then in sales, Rick worked his way up through the
business and took over the helm of Operations two years ago. His main challenge has been to deal with
balancing staffing at the factories with the unpredictable demand pattern for consoles. The patterns that
existed with peaks during the winter season and just before the summer break no longer occurred.

Barb Regan Sales Director

Barb was seen as a strategic hire when she joined Blue Buddies just under a year
ago from a major global computer giant, where she was deputy Global Sales
Director. She holds a PhD in Computer Science and was a prominent researcher
before her management career development led her to doing a stint in Sales.
Following Blue Buddies struggles to change its culture, Barb was seen as the right
person with the intelligence and initiative to make a real impact at Blue Buddies.

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Registering on www.stratxsimulations.com

You need to register on www.stratxsimulations.com as a BOSS user before you are authorized to log in the
BOSS simulation.
Why register
The registration process will allow you to be uniquely identified in our database. Registration is absolutely
mandatory as the use of BOSS is strictly reserved to registered participants. In addition, the BOSS web site
includes several facilities allowing your instructor to easily interface with all participants registered in
his/her course. For instance, the instructor may ask you to fill in a quiz or may send you emails through the
BOSS platform. If you are not a registered user, you may miss on some important information.
When register
You need to register prior to the beginning of your course. Do not try to register before you have received
an email from your instructor asking you to do so.
This email will provide you with the ID of your course, a 6-character string such as A07678 that uniquely
identifies your course. Make sure to key in the Course ID properly when registering as you may otherwise
be assigned to the course of another professor, possibly teaching in another country!
How to register
You will need a Participant Activation Key (PAK) to register. This is a unique string of characters such as
BNP-4GSV2 or GWX-4SSLR that you will use to log in the StratX Simulations portal and access BOSS. There
are two ways to obtain a PAK depending on the licensing option selected by your instructor.
You may purchase your PAK through our e-commerce website. You will have to specify the Course ID
provided by your professor. Registration in our database will be done automatically upon purchase, and
you will receive your PAK by email.
You may also receive a PAK from your professor. This happens if your university purchases PAK directly
from StratX in bulk quantity.
If you purchased your PAK through our e-commerce website, you are almost done and you may go directly
to the section 2.1.
Otherwise, you should now go to www.stratxsimulations.com and follow the instructions below.

Click the Register link at the top-left corner of the page.

Select A Participant in the You are drop-down box.
Click Register now at the bottom-left corner of the page. (See Figure 9)
Enter your PAK, course ID and contact details as shown on Figure 10 and click Register. If you do not
know your course ID yet, leave the field blank and continue; you will be allowed to enter it later.

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Figure 9 - Registering as a Participant

Figure 10 - Completing the registration form

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