ACME Corporation Final Report

ACME CORPORATION
Final Report
SB 450-03
Saul Ellison

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Table of Contents
Our Mission Statement & Company Values ............................................................................. 3
Mission: .......................................................................................................................................................................................... 3
Company Values: ........................................................................................................................................................................ 3
Original Strategies (Corporate, Business, Functional) .............................................................. 3
Corporate Strategy: ................................................................................................................................................................... 3
Business Strategy: ..................................................................................................................................................................... 4
Functional Strategy: .................................................................................................................................................................. 5
Actual Results of our Initial Strategies (Corporate, Business, Functional) ................................ 6
Corporate Strategy .................................................................................................................................................................... 6
Business Strategy: ..................................................................................................................................................................... 7
Functional Strategy: .................................................................................................................................................................. 8
ACME SWOT Analysis ............................................................................................................ 11
ACME Strategy Compared to Competitors ............................................................................ 13
Advice to Future Competitors ............................................................................................... 14
Works Cited .......................................................................................................................... 17

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Our Mission Statement & Company Values
Mission:
Acme Company aims to provide our customers with the highest quality footwear at the best
prices. Our goals are to bring together the diversity in culture, mind and the human body and
further enhance our potential. We strive to be at the forefront of the industry while maintaining
our values that ride on ethical integrity, environmental awareness, and a commitment to our
customers to continuously provide the best products we have to offer.
Company Values:
Acme Company values all assets that our company possesses, starting with our valuable
employees. We expect the highest standards from all of those within Acme, including the moral
and ethical responsibilities we all have to the firm, customers, and other stakeholders. We value
fair dealings and negotiation with customers and retailers. Lastly, Acme values its corporate
responsibility and ability to do our part in being a leading example of good corporate ethics and
commitment to environmental action.
Original Strategies (Corporate, Business, Functional)
Corporate Strategy:
The original Acme Corporation corporate strategy was to rapidly develop our business in
emerging and developing markets through the use of Brand-label and Private-label business
dealings. We aimed to focus our corporate strategy in the North American, European, and
African, as well as our Asian Pacific and Latin American markets. Acme aimed to have an

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optimistic and aggressive approach pertaining to the emerging markets of Asia-Pacific and Latin
America for the expected growth rates foreseen as being higher than in the North American and
European markets. Establishing a dominance in these markets was one of our goals in order to
allow us to experience rapid growth in these emerging sectors and also so that we could
potentially scale down our business operations in North America, Europe and Africa due to the
size of the competition in these areas. We planned to do this by making the North American,
European, and African markets highly cost effective sectors, as well as prioritizing sales and
market share dominance in Asia-Pacific and Latin America markets.
We initially recognized an opportunity for sustainable growth in Asia and Latin America
with the low costs and our ability to engage our target market with our mission statement in
order to allow for growth and diversification through style and quality, in which we concluded
would be highly sensitive in these markets. We saw opportunities for divestitures and
retrenchment in North American and European markets simply due to the competition and the
amount of focus in these regions concerning the specific segments.
Business Strategy:
Acme Corporation’s initial business strategy aimed to differentiate our company from the
rest of the competitors in the industry. In order to do this we planned to spend money on research
and development and advertising and by doing this we not only aimed to enhance our product in
terms of style and quality, but also aimed to show it off to our potential customers to further
propel our brand image and recognition. Acme Corporation believed these factors would lead to
buyer loyalty and we aimed to combine it with high quality in hopes that this strategy would lead
to less price sensitivity. By being aggressive in the beginning and capturing a large portion of the

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market share, Acme believed that this strategy would retain the company for many years as long
as the company continually aimed to improve the products.
Functional Strategy:
Acme Corporation planned to differentiate our product by mastering the marketing pull
through spending large amounts on advertising in order to create customer demand and customer
loyalty. In doing this, Acme planned to spend more than competitors on advertising in order to
lead the industry in market share. We planned to reach out to new markets in order to establish
customer relationships in each region.
Acme Corporation planned to operate with as little debt as possible, however, the
corporation would feel confident in taking out loans from the bank or issuing stock to
shareholders to raise additional capital in order to invest back in the company. Acme’s biggest
concern was ensuring that there was sufficient plant capacity to sustain the demand for our
company’s product. If additional capital needed to be raised to increase plant capacity, then we
planned to take the steps needed to ensure this reality.
Acme Corporation planned to take the operations function of our functional strategy very
seriously. The company planned to create a high demand for our product with advertising efforts
and because of this the company aimed to be prepared to sustain the supply and demand in order
to earn exceptional profits. This meant that Acme would pay close attention to plant capacity and
strived to ensure it would be sufficient to the demand created for the product. We believed
Inventory levels would be crucial to avoid stock outs and keep the consumers happy and coming
back to buy the product. The company aimed to ensure that inventory levels would meet the
demand. Acme Corporation also planned to create a quality product that customers would have
confidence in. In order to succeed Acme aimed to enhance the S/Q rating of our product to the

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best of our ability while still creating a positive profit margin. In order to do this the company
strived to use superior materials when creating the product to enhance the style and quality.
Human resources would be crucial to the success of Acme’s strategic plan through the
number of employees required to pursue expansion in other regions. Employees would need to
be trained and new managers would need to be developed to work in foreign regions. Training
managers for foreign assignments was important to Acme’s initial strategic plans. Acme human
resources would strive to ensure that all employees have sufficient ethics training to coincide
with our beliefs on corporate social responsibility.
Actual Results of our Initial Strategies (Corporate, Business,
Functional)
Corporate Strategy

Our corporate strategy proved effective from the onset of the first 5 years. We aimed to
achieve overall Market Dominance particularly in Asia -Pacific Market that proved very
successful. Years 11 & 12 stayed consistent at 12.8% Market share thanks in part to our strategy
to incorporate high advertising in the wholesale segment with the Internet segment at 13.5% and
11.3% respectively. Year 13 proved pivotal in gaining Market dominance here and going
forward we held the highest market share going from 14.9% wholesale (YR 13) to peak in year
14 at 19.4% showing our methods proved successful. This also was reflected in several markets
from year 13 moving forward including Latin America which showed substantial losses only in
the final 2 years and Market dominance in the wholesale segment in Europe and North America
due to the success of our marketing campaign. As can be shown, our substantial increases in our
largest target market in years 13 and 14 are reflected in the graph below. There is a continuous

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uptrend right up until year 14 when combining all segments and then we began to suffer in
market share due to our overall cutbacks in spending.

Business Strategy:

Our business strategy proved very instrumental to our overall lead in sales for every
except year 18 when the currency rates severely hampered our sales strategy and affected the
overall competition as a whole showing an overall decrease in overall sales across the board.
Our belief in our high advertising spending such as that in North American where we increased
our advertising from $7,000 (in million) to $11,500 for the majority of years up until year 18. We
had demonstrated this as well in all of our other geographic segments showing an overall high
spending compared to the industry average for every year up until year 14 where we decided to
slowly begin our policy for spending cuts to make our business model more efficient. When
looking at both Latin American and Asia Pacific they both decreased from year 14 to year 15 in
advertising spending $7,500-$6,500 and $8,500-$7,000 respectively. This brought our overall
bottom line up but also showed slower growth in our revenues streaming. Even with these cuts
our strategy for customer loyalty proved vital in maintain our sales margins overall until year 18

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where myriad of circumstances in the currency exchange rates hampered us. Another important
metric was when we needed to finance our internal production capacity growth to meet the
exceedingly high demands our price in segments such as North America went as high as $54 all
the way down to $43 and it still allowed us substantial market share in not only the wholesale
segment but also in our internet sales relative to our competition which proved very vital
learning lesson moving forward when we decided to make cuts in advertising, the many
consistent years of expenditures in advertising gave us a Brand recognition that proved
extremely strong even with price fluctuations.
Functional Strategy:
Our overall business model was to enhance our exposure to such an extent there would be
a massive demand that our competitors couldn’t match. This meant we had to expand our
production capacity at levels that weren’t matched by competitors and financing that became a
major focal point in the beginning years of our company. In year 12 we decided to make our first
investment into construction for our capacity in Asia-Pacific due to lower costs. By year 13 we
had total capacity of 7,100 (in million shoes) compared with the bulk of our competition in the
6,000 ranges. However this was yet still not enough to meet our demand as we still stocked our

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in several segments thus leading to lower than expected revenues and but an increase in other
fundamentals such as our EPS. Realizing what the investment meant, we decided to invest a
further 2,600 million shoes that same year and also add plant upgrades in the same year. As is
shown, maintain levels similar to our competition in North America we made massive
investments culminating in a total production capacity of 9,700 (without overtime).
Eliminating the need for private-label
shoes allowed us to focus exclusively on our
own sales and gain the advantage to sell and
meet our demand. Even with these upgrades
that lead us to immense growth in the years
with these upgrades coupled with high
advertising we dominated in sales, market share, and even our image rating also increased. This
boost propelled us in Global sales up until year 16 when our overall strategy on cost cutting
started to affect the number of sales we aimed for.

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Our financing for this all came through primarily from our equities segment, which at
first seemed the logical choice. Our credit rating had benefitted giving us a consistent A+ rating
from year 14 on. The issues however from this issuance of sales had negatively impacted our
Stock price and EPS.

As is shown, with our massive capital expenditures and financing through issuing shares
it diluted our EPS and harmed our stock price. This was expected because with the growth then
finally achieved in Year 14, we were able to achieve and regain both our EPS and stock price.
Our cost cutting initiative began to take shape as we proceeded to buy back shares thus helping
undue the mass dilution and that expectantly brought our stock price to a peak at $80.50 up from
$28.93 the previous year. We expected as stock increase but not a 178% increase, this wound up
hampering our efforts to buy back shares thus slowing our ability to catch up with our
competitors who relied on debt.

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In hindsight, a better mixture between our debt financing and equity would’ve made this
more achievable. Due to this, our cost cutting became extremely dramatic in the final years
hurting our revenue growth and market share lead. We went to extreme lengths to buy back these
shares in a rabid bid to catch up on our fundamentals.
ACME SWOT Analysis
Acme Company had much strength that enabled us to be successful in the Business
Strategy Game simulation. Two of the main strengths that led to our success were our high Style
and Quality Rating and our heavy advertising investments. Being on the higher end of the Style
and Quality scale for the whole simulation, which coincides with our mission to be at the
forefront of the industry and provide the best products we have to our customers. We were able
to provide this high quality shoe at an affordable price, which is why our Internet and wholesale
prices were strengths as well. The heavy investment in the beginning on advertising and celebrity
endorsements were vital to our demand being so high, and is what put us ahead of our
competition right out of the gates. Some of our other strengths include always offering free
shipping and fast delivery times for our online customers. Lastly, utilizing many retail outlets
and providing them with support was important for increase the reach our products had.
Acme Company had weaknesses that brought us down from the top of the rankings to
land in the middle of the pack. One of these weaknesses is the combination of not having enough
capacity throughout the simulation to meet our high demand and stocking out. The high demand
we were able to generate went somewhat wasted as we sometimes struggled to produce enough
shoes. We sometimes had to artificially decrease demand by raising prices and if we could have
avoided this problem, we would have been much better off. Likewise, towards the end of the

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simulation when exchange rates changed having production plants in each region would have
been helpful, and was another weakness for us. Lastly, at the end of the simulation we were left
with no celebrities under contract after losing bids to our competition, and this was a severe
setback to us. Not having any celebrity appeal at the end stifled our demand and made the Year
18 decision that much harder. We were able to overcome our weaknesses and rely on our
strengths to still be successful in this simulation.
Acme Company also had threats and opportunities throughout the simulation that could
have altered our outcome. One of the threats we faced was tough and knowledgeable competition
from Grand Company and Coolest Kicks. Towards the end of the simulation both groups were
able to surpass us in the rankings and were gaining market share as we lost it. The ability to
respond to that and right the ship is what got us back on track, and made it a year over year battle
with the Coolest Kicks company for fourth place. In terms of opportunities I think there are a few
places where Acme could have seen improvement. One was the private label industry. If we
were able to increase our capacity and not have to worry about our demand, we could have
ventured into the private label segment and control a large portion of that market share. This was
a missed opportunity that we disregarded from the beginning, and should have been looked into
more thoroughly. Other opportunities also presented themselves, such as the ability to purchase
capacity from other companies selling it off. In Year 13 Group J sold off 2,000 units of capacity
in the Asia-Pacific region, which could have been purchased and utilized at a pivotal point in the
simulation. If these threats and opportunities were monitored more closely we may have been
able to have more success.

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ACME Strategy Compared to Competitors

In our industry we had 10 competitors with groups such as Groups H, F and J
incorporating extremely cheaper pricing. Group H and J particularly relying on cheaper and
lower quality shoes to generate sales. On the other end of the spectrum you had Groups such as
B, C and D who up to a point (overall year 15 and 16) that relied on higher pricing strategies
along with relatively higher quality shoes (with the exception of Group D who maintained higher
pricing but lower quality). Many other groups including ours gradually became competition
oriented overall in terms of adapting to one another after year 14 and this even began to take
shape in certain companies such as Group D who began to dramatically change their pricing over
the long run in accordance with the competition.
One of the biggest observations that we took away at overall strategies was the scope and
size of focus that companies opted for. ACME believed in achieving higher market share and the
largest sales that our profits would earn themselves over the long haul and allow us to instead of
focusing on sales, pivot to cost cutting. Then you had other companies who were clever with
their thinking such as Group G who focused specifically on private label sales which was an oft-
neglected category.
Consistently, ACME proved a top 5 companies, with moments in the top consistently
before eventually settling as the 5th
best company in overall performance. One of our major
drivers to success before our vain focus on cost cutting to buy back shares shot us in the foot so
to speak, we maintained higher than average market share consistently and also produced a
larger amount of product line breadth. In our peak year relatively which was year 14 on a number
of metrics you could see how far we differentiated ourselves immensely as shown.

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Overall Group G proved a very compelling company to our strategy as our focus pivoted from
sales to cost cutting to catch up with our fundamentals and them. This allowed a constant
jockeying particularly with Group B and D. Our strategy proved inefficient n the long haul which
regardless of our sales output and profit couldn’t change our exceedingly higher than average
shares outstanding and our cost cutting cut into our image rating amongst other metrics.
Advice to Future Competitors
From our experience in the Business Strategy Game Simulation there are important
pieces of advice that we would like to extend to future competitors. Starting with corporate
citizenship, our first suggestions are to take notice of the impact each decision has. We found
that some investments, such as the use of recycled boxing and packaging were costing more
money than it was worth in terms of the corporate social responsibility points we
received. Opposing, we found that utilizing the ability to have ethics training for all employees
and a workforce diversity program were well worth the investment. Ethics training gives the
options for all employees or for managers only, and we found the extra money spent to train all

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employees benefitted our corporate social responsibility score significantly. Being able to
practice social corporate responsibility in the simulation was very beneficial, and we suggest all
competitors to invest time into finding the right balance of spending here to be successful. Next,
capacity is something that each group realized the importance of at some point in the simulation.
Acme company suggests following a model similar to ours, but with some variations. It is
extremely efficient and effective for companies to increase their capacity as quickly as possible.
Instead of doing what we did and choosing to use our profits from sales and selling shares we
suggest that companies purchase capacity from other competitors or utilize the ability to finance
and take out loans. Proper planning will allow for annual repayment of the loans as well as total
repayment, which will lead to a credit rating above investor expectations. This will lead to more
cash on hand that can be used for other projects and better financial numbers overall. In terms of
where we suggest adding capacity, we initially intended to move out of the North American
segment to move to South America and maintain our Asia-Pacific plant, but were unable to do
so. With that said Acme suggests all competitors try to have plants in each region, and have each
plant have enough capacity to fulfill all the orders in their region. This strategy will also help in
the event that exchange rates again create a difficult situation if you have to move money and
products back and forth from different regions. Plant upgrades are also very beneficial
investments, as we took advantage of the ability to cut our reject rate in half. If this is done early
enough the investment pays for itself and increases the production ability of the company. All
upgrades should be investigated to see whether they provide a feasible investment for the
company and will pay off in the long run. For the actual production of a competitor's shoes there
are many factors that will affect the company. One such factor is Style and Quality rating. We
suggest playing with the numbers associated with the Style and Quality rating to find the most

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cost efficient way to sustain a certain star rating. Again plant upgrades can be utilized to add one
star to the overall Style and Quality rating. The Style and Quality rating is especially important
to customers and should be the main strategic focus of any competitor who wants to be
successful in the simulation. We also suggest following other groups by adjusting employee
compensation rates as there is a direct correlation between pay, reject rates, and production. This
is a good area to invest in to increase employee morale while also boosting production.
Employee pay also ties into overtime production, which was necessary for Acme to reach our
customers demand. Working employees overtime to produce sneakers lead to a cheaper cost to
make a pair of shoes, but increased our warehouse expenses considerably. For the distribution of
shoes something we found incredibly helpful was using the Player's Manual to find the best way
to move our shoes around. This means taking exchange rates and tariffs into account, which can
be difficult. Acme Company took advantage of the North American Free Trade Agreement
(NAFTA) to freely move our shoes to North America and between North and South America.
Also, since it costs the most to ship shoes to the Asia-Pacific region ($8 per pair) we made sure
we were able to supply the demand in Asia-Pacific with the shoes we produced there to avoid
that cost. Advertising is something we heavily relied on and as the reason why we had such high
demand. We’ve said it from the beginning that early, heavy investing on advertising on
celebrities will lead to greater exposure, higher demand, and customer loyalty. We saw all these
come to fruition, and again from the Player’s Manual learned that this customer loyalty leads to
less sensitivity to price change, an important leg-up for us. The increased production we
mentioned would come in handy when a strong advertising budget combined with the use of
celebrity appeal will skyrocket demand. Celebrities are very important to advertising, and we
found that bidding high to ensure we got them was the best strategy. We found that customers

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also responded well to free shipping and mail in rebates, which we also suggest utilizing. Lastly,
we suggest taking a more in depth look into the private label segment as we completely avoided
it. As we weren’t the only ones who did that, there is market share and money to be gained by
venturing into this area of the simulation. We hope that these suggestions to future competitors
help in their success now that we have had the experience of going through the Business Strategy
Game simulation.
Works Cited
Arther A. Thompson, Gregory J. Stappenbeck, Mark A. Reidenback. "BSG Players Guide."
December 2016. The Business Stategy Game. <http://www.bsg-
online.com/users/PlayersGuide.pdf>.
The Business Stategy Game. BSG Competing in a Global Marketplace. December 2016.
McGraw-Hill. <http://www.bsg-online.com/>.

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