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Management Challenge an exploration of business This computer simulation give you and the others: an opportunity to manage a “real” business for several.

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Presentation on theme: "Management Challenge an exploration of business This computer simulation give you and the others: an opportunity to manage a “real” business for several."— Presentation transcript:

1 Management Challenge an exploration of business This computer simulation give you and the others: an opportunity to manage a “real” business for several simulated years making decisions as part of a small team covering: –Marketing –Operations –Finance your objective, while competing against the other teams, is to make your business a success

2 The Simulation This activity consists of three stages: Preparation Decision-making Review Preparation –familiarisation & organisation –deciding strategies & objectives Decision-making –submit decisions –effect simulated –get & review results Review –discuss & compare results

3 The Situation company is a subsidiary has been operating for several years makes & sells two products (A & B) has a factory that can produce both all costs & prices are in a universal currency companies are in direct competition You will run this business for several periods, each of which represents one trading year

4 Marketing sales can be influenced through: –product prices –promotional expenditures –a sales force –debtor policy –inventory availability –the actions of the other teams You decide price & promotion for each product separately. You decide the number in the Sales Force and they sell both products. You decide the time customers will have to pay (debtor days) and this applies to both products.

5 Costs Unit Costs –Product A = 40 AUs –Product B = 30 AUS Production Overheads - 3 AUs Depreciation - 10% /year Sales Staff - 25 AUs each/year General Overheads AUs/year Promotion Costs - decided by you

6 Other Data interest on overdraft - 20% per year interest earned on cash - 10% per year mandatory dividend - 10% of Equity current capacity units/year capital investment – 20 AUs/unit of capacity capacity increases take a year to install

7 Decisions For each product separately price promotion production And in general sales force new factory capacity debtor days Use the decision form supplied and complete it carefully and legibly and hand to the simulation controlled at the specified times.

8 Results Preliminary Results –demand & inventory for each product –operating profit & cash/overdraft Company Reports –Profit & Loss –Equity, Assets & Liabilities –Financial Ratios Business Research –Market News (prices & market shares) –Company Reports –Company News

9 Observations it takes time to understand but the business still must be run therefore your decisions will not be perfect time will be a constraint by the end you should (just) be in charge of your business your business skills will be challenged remember the purpose is to learn! (rather than just to win!) so, take time to reflect & review and have fun!

10 Final Year Result Team Name Sales Revenue Operating Profit Earnings Total Equity Cash/Overdraft Gross Profit % Operating Profit % Return on Assets Return on Equity Capital Gearing Capacity

11 Final Year - Market Position Team Name Product A Price Market Share Contribution Product B Price Market Share Contribution

12 Cumulative Results Team Name Sales Revenue Operating Profit Earnings Gross Profit % Operating Profit % Return on Assets Return on Equity Worst Gearing

13 Efficiency Losses Team Name Excess Promotion Sales Losses Idle Capacity Total Losses Operating Profit Potential Profit


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