Markstrat

Draft

Introduction

Markstrat is the product name of an educational business simulation environment, more precisely a strategy marketing simulation. It is developed an distributed by StratX. Its Strategic marketing simulation with Markstrat web page (retrieved April3, 2019) describes the product in the following terms: “Markstrat is a marketing simulation software which offers MBA students and professionals a risk-free platform in order to test theories and make decisions. StratX founder, Jean-Claude Larréché, developed MarkStrat on the simple theory: if you give MBA students a way to apply under real market conditions the theory they learned during their lessons, they will not only devote more energy but will also learn from their mistakes and successes alike.”

On the Insead web site, Markstrat page (retrieved April 3, 2019) describes Markstrat as a “marketing strategy simulation available in B2C Durable Goods, B2C Consumer Goods and B2B versions. Markstrat is a very effective tool for learning strategic concepts such as: brand portfolio strategy, segmentation and positioning strategies, and operational marketing.”

According to Kinnear & Klammer (1987) , it can be used both as and educational tool to teach an array of marketing skills and as a tool to conduct experimental studies. It also can be used as assessment tool.

According to Ikeda et al. (2015) “Participants take a series of marketing decisions implementing concepts such as segmentation and positioning, consumer behavior, marketing mix (4 P’s), and marketing research. Moreover students have to analyze and interpret data in order to acquire more and better market knowledge about customers and competitors. Students use Markstrat information and scenario to develop a Marketing plan. After presenting the plan for one year they start the simulation and take decisions for a long term result (commonly, 7 or 8 rounds)”

History and general principles

Markstraat was founded by Insead professor Jean-Claude Larréché. It has been developed since the late 1997. As of April 2019 the current version is Markstrat 7.

According to [ Wikipedia], “Between 1974 and 1977, working with an assistant, Hubert Gatignon, he developed his work on marketing modelling to create a teaching simulation called Markstrat (Mazur & Miles 2007, p. 50). Markstrat is a game where teams of students compete against each other in an artificial world under realistic market conditions. It is claimed that Markstrat is now used in 8 out of the top 10 business schools in the world and 25 of the top 30 schools in the US.”

According to Sharif & Ranchhod (2009) , in 2008, “MarkStrat, has been in use for over 25 years and continues to be the worldwide leader of interactive marketing simulations in education, having been used at more than 500 educational institutions across a wide range of undergraduate and postgraduate courses throughout the world (Markstrat, 1997). The simulation software itself arose out of a pedagogic desire to increase and improve the efficiency and reflectivity of understanding strategic decision-making behaviour within the focal area of marketing; also addressing the need to apply theoretical strategic concepts (portfolio mix, market analysis, corporate strategy, market research, forecasting, team planning and inter-team dynamics) in a “safe” simulated environment (Larreche and Gatignon, 1990a).”

In 1987, Kinnear and Klammer (p. 491) describe the Markstrat simulation environment as follows: “Markstrat is a marketing-strategy simulation game in which five firms compete against each other. This competition is based upon the utilization of the classic marketing variables: product development and management, distribution, promotion, and price. Decision makers in competing firms utilize marketing research studies and develop strategies based upon effective segmentation and positioning. Their performance in the game is based upon such measures as market share, sales, contribution margin, and return on marketing investment. In many respects, then, it is a classic strategic marketing situation that a real-world manager would face.”

Sharif & Ranchod (2009:3-4) describe the philosophy, the design and the rules of the simulation environment as follows:

• Teams of (students) “compete against each other under semi-realistic synthetic business conditions, to design, innovate, brand and market a set of products across two markets in an artificial world with a given budget and a target to maximise shareholder returns (Burns, 1997; Gatignon, 1987).”
• Participants do not only explore a simulated market but also confront real, human competitors who are interacting and setting business strategies. To do so, the “platform itself essentially provides a suite of decision-making and forecasting tools available as a suite of “management dashboards” such that each team attempts to meet the needs of five different (virtual) consumer groups.”
• The “game progresses through a series of up to 12 –15 virtual “rounds” over a period of 3 –4 days, whereby each team –hence company – have to make strategic decisions on product R&D, production, market research, HR costs, distribution and so forth.”. More precisely: In a given round, student groups look at results for their team and the "world", discuss and then input team decisions (i.e. a complete marketing budget).
• The simulation environment collects decisions decisions from all participant groups on a periodic basis, computes a result and transmits these under the form of management reports (e.g. shareholder price, rate of inflation, product drift, consumer satisfaction and other indices). Participants also receive the result of marketing studies ordered in the previous period.

Markstrat 7

Markstrat has a client-server architecture. On the client side, students and tutors can access data and make decision. The simulation engine is hosted on a server.

Educational benefits and conditions

The Markstrat page at Insead , identifies the following pedagogical objectives:

• Learn fundamental strategic marketing concepts
• Experience essential marketing tools, such as: marketing plan, perceptual mapping, conjoint, regression, portfolio analysis
• Master market and competitive analysis
• Combine tactical implementation with long-term strategy

A number of educational benefits are expected from simulations like Markstart. We can distinguish motivational aspects (enthusiasm, engagement), development of general and metacognitive skills (awareness of skills, strategy development, time management, decision making, team work, problem solving), concept learning (develop core marketing principles) and transfer (bridging the gap between theory and practice). Asiri et al. (2017), in a literature review that maps expected employability skills with simulation features conclude that employability skills can be improved using business simulation games.

Some studies are target specifically the Markstrat environment. Already decades ago, Haskell and Taylor (1985) report that “that participants' confidence in applying learned marketing concepts and tools to real-world situations increases significantly due to participation in the simulation.”

Sharif & Ranchhod (2009:8) postulated that the “Markstrat simulation represents one of the most effective ways to confront students with real-life business situations, offering them the possibility to apply their theoretical knowledge, to interact with other people, and to take responsibilities for implementing business decisions. All these aspects of the Markstrat exercise determine the development of essential skills, at theoretical, practical, individual and inter-personal levels.” A user-based survey of 210 UK undergraduate students within a business and management degree somewhat corroborated this position: “The survey responses found that on average most students viewed the business simulation game experience as “somewhat” effective, being slightly higher than average on the ordinal Likert scale of 1-7 (with a dataset average of 5.22 across the sample of 210 students). The remainder of the descriptive statistics highlighted a positive view on how the students understood core marketing, strategy, operations management and macro-economic principles (such as those relating to pricing, customer satisfaction etc) –and the fact that the simulation itself afforded a “safe” environment to take pseudo-business risks with a level of immersion which the students also found to be conducive to learning.”

A number of publications investigate under which conditions, a simulation is effective. For example:

Focus should be on learning, not gaming (Doyle and Brown 2000).

Learning with a business simulation like Markstrat takes time. Redmond (1989) finds that “The effective lower boundary for MBA students using Markstrat appears to be five periods”, i.e. students have to complete five full cycles.

Business simulations seem to be effective when learners expect to perform well. Caruna et al (2016) report that Performance Expectancy and Effort Expectancy drive Learner Satisfaction, which in turn is related to Recalled Performance.

Markstrat as research medium

The environment can be used to conduct a variety of research, e.g. in behavioral economics or learning psychology.

For example, Lukas et al. (2016) argue, based on a simulation using Markstrat, that organizational performance feedback influences individual decision-maker cognitions and thereby changes a team’s attention focus in terms of strategy.

Pathak and Lim (2016) use a Markstrat simulation to study (1) how do performance-linked rewards influence the decision making styles of marketing managers who have to be innovative in dealing with competition and (2) whether the promise of attractive performance-linked rewards helps or hinders performance of a marketing unit.

Lant (1992:18-19) concludes that “games like Markstrat are especially valuable tools for studying strategic decision making” since it is very difficult to determine how, when, and by whom strategic decisions are made in a real organization. “Because simulation games are closed systems with few participants who repeat similar cycles of decision making over time, they are particularly well suited to the study of decision making.”

Links

• Markstrat (Wikipedia)
• Analysing the markstrat simulation (UKEssays). A student experience report.

Bibliography

Other

• Cook, V. J. (1987). Introduction to strategic studies in Markstrat. Journal of Business Research, 15(6), 467-468.

• Green, D. H., & Ryans, A. B. (1990). Entry strategies and market performance causal modeling of a business simulation. Journal of Product Innovation Management: AN INTERNATIONAL PUBLICATION OF THE PRODUCT DEVELOPMENT & MANAGEMENT ASSOCIATION, 7(1), 45-58.

• Ikeda, A. A., Campomar, M. B., & Campomar, M. C. (2015). Using Simulator Markstrat in Marketing Planning Courses in Brazil. In The Sustainable Global Marketplace (pp. 211-211). Springer, Cham.

• Kinnear, T. C., & Klammer, S. K. (1987). Management perspectives on Markstrat: The GE experience and beyond. Journal of Business Research, 15(6), 491-501. https://www.sciencedirect.com/science/article/abs/pii/0148296387900348

• Lant, T. K., & Montgomery, D. B. (1992). Simulation games as a research method for studying strategic decision making: the case of Markstrat (No. 1242). Graduate School of Business, Stanford University.

• Larreche, J. C. (1987). On simulations in business education and research. Journal of business research, 15(6), 559-571.

• Larreche, J. C., & Gatignon, H. (1977). Markstrat: A Marketing Strategy Game, Palo Alto: Course Technology.

• Larreche J-C., Gatignon H (1990a). Instructor's Manual: Markstrat -A Marketing Strategy Game, Palo Alto: The Scientific Press.

• Larreche J-C., Gatignon H (1990b). Markstrat -A Marketing Strategy Game; Participant's Manual. Palo Alto: The Scientific Press

• Sharif, Amir M. & Ranchhod, Ashok. 2009. "Using the markstrat business simulation to develop strategic management behaviours".European and Mediterranean Conference on Information Systems. https://bura.brunel.ac.uk/handle/2438/4233