Industry:

Firm:

Role:

Overview

Setting:

The setting for this simulation is the U.S. window industry. Within this exercise three suppliers compete for the business of three large business buyers of windows and other building materials The firms operating in the industry are as follows:

Window Suppliers:

  1. American Windows
  2. Martin Windows
  3. Parade Windows

Key buyers of Windows:

  1. Lumberton Inc.
  2. Pullerton Corp.
  3. HarrisBuilding Products

This is a business-to-business marketplace in that the purchasers of windows are not the actual end-users of the product. Buyers in this case purchase windows with the features compatible with the products/services they create and the customers they serve.

Products:

Three product options are to be considered within this exercise:

  1. Impact Resistant Glass: During a hurricane, tree branches, lawn furniture and building material are hurled at windows and doors. To prevent objects from penetrating glass surfaces, Martinand American have created products with impact-resistant glass. Impact-resistant glass is created by “making a sandwich”—multiple laminates are placed between two pieces of glass. The result is as clear as glass, but much tougher. Impact-resistant products are rigorously tested to withstand the impacts of 2x4 boards launched at speeds up to 50 feet/second (34.1 mph). For the purposes of this simulation, Parade does not promote hurricane resistant glass.
  1. Extruded Clad Exteriors: Windows made from highly dent-resistant extruded composite cladding -not roll form aluminum - are more substantial in look and feel and less likely to be damaged by weather or anything else. For the purposes of this simulation, American Windows currently produce windows with roll form aluminum exteriors, not an extruded product.
  1. Easy Clean/in-glass blinds: Easy cleaning and maintenance features are promoted by some manufactures through combinations of in-glass blinds (eliminating the need to dust/clean blinds) and tilting window designs allowing for easy cleaning. While Martin provides some functionality in this area, for the purposes of this simulation, Martin’s products DO NOT currently compete along this dimension.

The Game:

The game you are about to play is a computer simulation exercise. While many of you may have experience with computer simulations, I hope you will find this to be quite different from other games you have played. Whereas most games simulate a business environment “inside” the computer (by entering a series of decisions and pushing “Go”), this exercise allows you to simulate the buying, selling, and sales management environment “outside” of the computer. Through personal interaction with your classmates, you will determine if your firm meets its quotas, if you obtain your bonus, and if your customers remain satisfied with your products and services. Sales managers will have to motivate sales people to meet both volume and profit objectives. Sales people will have to communicate the value of their products, negotiate the sale of their products, and manage relationships the relationships that evolve throughout the game. Finally purchasing managers will have to manage volume, product mix, and customer satisfaction.

So, let’s get started…

You will be assigned a role within one of six companies in the industry (sales manager, sales person, purchasing manager). The following sections provide the information you will need to get started. Each quarter you will receive additional information, providing any changes in pricing, volume, or industry information impacting your decisions.

Purchasing Managers

Purchasing mangers are provided with:

  • A specified target purchase volume (number of windows to purchase)
  • Product mix targets (you may not be interested in purchasing with will all of the above characteristics)
  • Customer satisfaction data.

As a purchasing manager, you will be provided with a small amount of information helping you to identify those suppliers best suited to your needs, and the needs of your customers. Sales people should be providing you with their selling messages, identifying themselves as leaders in various areas. If you aren’t able to provide the type of products your customers demand (i.e. you purchase products outside of your targets) customer satisfaction ratings will deteriorate. Your primary objective is to obtain the right mix of products, from the right suppliers, at the right price. You will be provided with an “average equipment purchase price” target and an acceptable range allowable.

Purchasing managers are compensated based on acquisition cost reduction and achieving volume targets. A bonus of $1000 is available for staying within 5% of your purchase quantity target, and $2000 is available for not exceeding a 2.5% buffer around your targeted acquisition price.

Sales People

Sales people are provided with the production (in number of windows) available for sale. Production is very flexible, so the mix between the products available for sale is up to the sales force (note: you may not have the capability to sell every type of product, but you could sell all of your volume based on one type of product, or sell some of each product available). Quota is set at 95% of production. Your bonus is based on making quota (selling 95% -100% of production). Product and pricing information will be provided to you by your management team.

Sales People are compensated based on a commission plus bonus pay structure. Commissions are paid out on a unit volume basis. Commissions are paid on a point system equivalent to $2 per unit sold. Quota is set at 95% of available production for the quarter. Quota must be met before bonuses will be paid. Sales people can earn an additional $1/unit on all products sold, if quota is met. All monetary compensation for sales people is incentives-based; sales people receive no salary.

Don’t forget to sell all of your benefits; each buyer is looking for certain attributes. Establishing relationships with the right customer firms will prove helpful. Sales people make it all happen. They negotiate and construct the deals (within the confines established by management), but should also conduct themselves ethically. Do not divulging confidential information with competitors.

Sales Managers

All information available to the sales organization is provided to Sales Managers. Sales managers can distribute information to the sales staff in any way it sees fit.

Quarterly production volumes and prices are pre-determined by headquarters (you are given a range that you must stay within, deviations from this range must be cleared by senior management – your instructor). Prices are negotiated within the sales process; although a range of pricing is provided - based on purchase volume within the quarter – you may disclose pricing guidelines to sales people in any way you see fit. It is also within your responsibilities to coach sales staff to effectively meet your firm’s objective.

Managers are compensated and promoted based on profitability. A bonus will be paid to sales managers based on their ability to meet profit targets. A $3000 bonus is available for meeting margin targets and has the ability to increase if higher margins are achieved.

Ground Rules:

  1. Sales managers are responsible for collecting sales information following the end of the quarter and providing it to the instructor.
  2. Sales managers are to spread out around the building in order to provide some semblance of privacy.
  3. Purchasing managers are to spread out throughout the building (stay as close as possible to minimize searching costs, but spread out enough to ensure confidentiality of business deals).
  4. After each quarter managers from each company are responsible for reporting results to your instructor or TA, you will be given compensation results prior to subsequent negotiations.

Be creative! Have fun!