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Managing The GLOBAL Business ENGINUITY 2014 Copyright Virtual Management Simulations.

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Presentation on theme: "Managing The GLOBAL Business ENGINUITY 2014 Copyright Virtual Management Simulations."— Presentation transcript:

1 Managing The GLOBAL Business ENGINUITY 2014 Copyright Virtual Management Simulations

2 The Challenge A fledgling UK-based multinational construction company, with its headquarters in London, has been trading for just one year. A new management team is needed to run the company for the foreseeable future, making the key business decisions related to finance, marketing, overheads, procurement and job progression. The decisions are made for each period, which represents a quarter, or 3 months. The new management team need to form an effective strategy to grow the business, and satisfy the high demands of the company's shareholders, who are keen to see a quick return on their investment. Although based in the UK, and subject to UK tax laws and interest rates, expansion into overseas markets, and different continents, may be an attractive proposition. A lot will depend upon the prevailing economic climate in the UK, and worldwide, which changes as time progresses to provide a realistic and dynamic challenge for the new management team. Working in different countries will present some particular challenges to overcome, such as client restrictions, global competitors and environmental problems (extreme weather conditions, civil unrest, local labour problems etc). However, the potential rewards and opportunities of operating globally, such as worldwide client base, niche markets and lucrative large-scale contracts, may outweigh the risks. The decisions to be made, and fate of the company, rests in the hands of the new management team.

3 Business Strategy The new management team need to develop a clear strategy to :-  Grow the business and improve its value  Enhance the company’s reputation with clients  Keep shareholders happy The value of the company is measured by a number of assets, such as the company cash account, capital base and investments. OBJECTIVES Developing an effective strategy will involve acquiring a good understanding of :-  The economic environment in which the company is operating  The strengths and weaknesses of the business as it currently stands The strategy will consist of number of objectives relating to :-  Identifying new work in different sectors and locations (UK/Overseas)  Expanding the infrastructure of the business to achieve growth  Winning new work in a competitive bidding environment  Improving profitability through effective job and overhead management The company's strategy will need to be revised as performance changes.

4 Environment, Strengths & Weaknesses ENVIRONMENT Realistic scenario enabling participants to deal with business decisions and situations that are commonly encountered in real life. The scenario is based on the UK and World economies as they are today, both from a financial viewpoint (interest rates, overdraft limits etc), and in terms of the characteristics of different locations worldwide :-  Current and future availability of new work in the UK and Overseas  Potential client base, and their expectations  Rival competition for new work, and margins achievable To add to the realism the environment is constantly changing to provide ongoing challenges. COMPANY SETUP AT TAKEOVER Detailed information is available is make an appraisal of the strengths and weaknesses of the business when it is taken over, including :-  Share price  Company value  Profit figures (previous year)  Market share  Current work in progress  Future profit

5 Constantly Changing Scenario The Global economic environment the management teams are operating in is based upon a realistic scenario, and is constantly changing, challenging the management teams to keep refining their business strategy. Interest rate, corporation tax and borrowing limits affect expansion plans and profitability. Personnel availability varies depending upon the economic climate. The company share price can be influenced by internal and external of factors. Rival competitors can enter/leave the market. Risk varies by location and job, and can affect job progress and profitability if not managed effectively. The composition of new jobs available globally is constantly changing.

6 Timeframe Decisions are made each quarter, also called periods. There are 3 distinct timeframes for operating the business. THE HISTORICAL YEAR Prior to the new management team taking control the company was managed for one year, periods 1 to 4. Detailed information is available about how the company performed during this time. THE EARLY YEARS The new management team will be making their first decisions for period 5, and then for subsequent periods (6,7 etc). During the Early Years the competition for jobs comes from a number of simulated companies. Each one has their own unique profile and bidding history, and a careful assessment of the opposition is required to formulate an effective procurement strategy. THE LATER YEARS (“Head to Head”) During the Later Years the teams compete ‘head to head’ against each other for work. This creates an even more uncertain and pressurized environment in which the skills and team dynamics formed in the early years are really put to the test.

7 Making Decisions Decisions need to be made to implement the company's strategy. The decisions are made for a period, which represents a quarter, or 3 months. Decisions are made in four key areas. FINANCE The Financial/Commercial Manager is responsible for managing the assets of the company, and for looking after the company’s shareholders. OVERHEADS The Overhead Manager is responsible for developing an effective marketing strategy to increase the company’s market share by identifying new work globally, and for staffing the support service departments efficiently. PROCUREMENT The Procurement Manager is responsible for winning new work in a competitive and dynamic bidding environment. JOB PROGRESSION It is crucial to the success of the business to manage the company’s work in progress as profitably as possible by allocating appropriate project managers and labour levels. This will also involve overcoming potential problems, such as staff shortages, job delays and risk management issues.

8 Financial Decisions The Financial Decisions revolve about how to make best use of the company's most liquid asset, the cash account. The cash account is subject to an overdraft limit, which varies according to economic conditions. DECISION: What level of dividend to pay the company's shareholders. The company's was originally funded from a share issue, and shareholders expect a return on their investment related to how well the company is performing. Any dividend pays reduces the value of the business. The level of dividend is one of a number of factors that influence the company's share price. DECISION: How much cash to invest in other income earning instruments. The company can diversify into other income earning instruments to obtain a better return than can be earned at the bank, and reduce operational costs of the business (build and risk costs). Conversely it may be necessary to liquidate investments to raise cash. DECISION: Growing the business. Money from the cash account will be needed to expand the company's infrastructure (capital base) to enable more work to be taken on.

9 Overhead Decisions (Marketing) The management team are presented with a forecast of the availability of new work in 5 industry sectors in both the UK and Overseas. The forecast is for one year ahead, and includes information about the overall value of work, and the client base. However, at this stage there are no specific details about the individual jobs themselves. The task of the Marketing Department is to use the forecast to decide upon which sectors and locations to target i.e., marketing strategy. The decisions made by the Marketing Department will determine which jobs are indentified (prequalification), and their characteristics. Any jobs identified will be presented to the Procurement Department in the following period to be bid for. DECISION: Whether or not to increase the size of the Marketing Department. A larger Marketing Department can identify more work. DECISION: Into which sectors and locations to target Marketing Department effort. The number and value of the jobs identified is a function of the size of the Marketing Department, and into which sectors and locations the marketing effort is directed. A long term marketing strategy is needed as marketing effort can only be moved between sectors by a fixed amount each quarter.

10 Overhead Decisions (Other) DECISION: The number of staff required for the Head Office, QHSE and Measurement Departments. The task of the Overhead Manager is to ensure that the level of staff in each department each period is able to manage the company’s anticipated turnover from jobs being progressed in the in the quarter. Understaffing of the departments can increase costs and reduce value. To be a successful business, not only must the company's jobs in progress be managed profitably, but it is essential to manage the company's overhead departments as efficiently as possible. As well as Marketing, which identifies new jobs, the work of the staff in the Head Office, QHSE and Measurement Departments has a direct impact upon the profitability of the company's jobs in progress.  Head Office staff are responsible for accounting, buying, IT and other Head Office functions. Their work has a direct impact upon the build costs on jobs in progress.  QHSE staff are responsible for quality, health & safety and environmental issues. Their work has a direct impact upon build and risk costs on jobs in progress.  Measurement staff (quantity surveyors) ensure that money is recovered from the client for any work completed. Their work has a direct impact upon the measured value (turnover) from jobs progressed.

11 Procurement Depending upon where the company's marketing effort was targeted in the previous quarter, a number of jobs will have been identified in one or more of the 5 industry sectors, for which the company can bid. For each job that can be bid for, comprehensive details have been extracted, such as location, client, value, type, duration, and estimated cost and labour breakdowns. The Procurement Manager must decide which jobs to bid for through competitive bidding. The rival competition for jobs comes from a number of simulated companies. Each one has their own unique profile and bidding history, and a careful assessment of the opposition is required to formulate an effective procurement strategy. DECISION: To decide which jobs to bid for through competitive bidding. This will involve setting competitive bids based upon the the company’s ability to undertake the work, anticipated rival competition and a detailed analysis of cost and margin considerations.

12 Job Progression Decisions Having tendered successfully, it is essential that jobs secured are managed as profitably as possible to improve the company's value. DECISION: A project manager has to be chosen for each job. Project managers are vital to the successful running of each job. A selection of project managers with differing profiles are available from a Recruitment Agency, and it is essential to try and allocate the right person to each job been progressed, based upon their experience. DECISION: Allocating labour to progress each job in line with the company’s strategy for job completion. Labour can be either the Company’s own direct labour, or subcontractors. Planned labour levels were assessed at the procurement stage, but the actual levels of labour to allocate is influenced by many factors, such as progress to date and potential job delays.

13 Assessing Performance Although the primary objective is to increase the value of the business, company performance as a whole is measured by 10 Key Performance Indicators. Increasing the company's value will normally be a result of improving the other KPIs also. A performance summary is also available to analyse company performance in more depth in some key areas. The performance summary is available :-  Prior to the current management team taking charge  Since the management team have been in charge

14 Success Or Failure The fate of the company, lies in the hands of the new management team.

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