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1 Trade & Commerce EUE43E ‘Understanding Business’ Robert J. Williams.

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Presentation on theme: "1 Trade & Commerce EUE43E ‘Understanding Business’ Robert J. Williams."— Presentation transcript:

1 1 Trade & Commerce EUE43E ‘Understanding Business’ Robert J. Williams

2 2 Introduction to ‘Understanding Business’ Following this session you should understand: l What this module is about & how it will operate l How you will be assessed l Your module timetable l Why we are using a Business Simulation l How the Business Simulation operates l What you need to do to get started?

3 3 ‘Understanding Business’ l Using financial information effectively 1. Understand accounts 2. Analyse & interpret financial information 3. Evaluate financial performance 4. Report on financial matters l Financial planning 1. Identify sources of finance 2. Collect, analyse & present financial data 3. Identify appropriate methods of presentation

4 4 ‘Understanding Business’ l Financial control systems 1. Identify key financial indicators 2. Recommend action l Making financial decisions 1. Relate to specific business functions 2. Consult & communicate 3. Appraise financial consequences & make decisions

5 Assessments l See Handout l Assignment 1 – Team Presentation (40%) l Assignment 2 – Individual Report (60%) Use Assignment Cover with your details 5

6 Your Teaching & Learning Schedule... 6

7 The Formula One analogy for learning Business Management? 7

8 8

9 Teams? 9 No.NameTeam 1Aška Ondřej1 2Barba Serrano Marta2 3Barchánková Kristýna3 4Brtníková Petra4 5Chán Petr5 6Cholenský Jan6 7Cihelka Filip7 8Collard Alexia8 9Fiala Tomáš9 10Freitas Ana Margarida10 11Gärtner Ota1 12Golenkov Alexander2 13Háková Anna3 14Hutchful Edwin4 15Jelínková Kateřina5 16Jeslínková Barbora6 17Jordán Onrubia Estela7 18Karlach Jan8 19Kastl Jan9 20Khaustova Svetlana10 No.NameTeam 21Khaustova Nataliya1 22Krofta Jiří2 23Křemenová Lucie3 24Květová Pavla4 25Landa Ivan5 26Malá Pavlína6 27Malec Karel7 28Maraulas Darius8 29Marcoňová Barbora9 30Markovič Tomáš10 31Michková Adéla1 32Navas Gimenez Alvaro2 33Nwaiwu Celine Chikodi3 34Otekhile Cathy - Austin Funke4 35Perelló Alonso Marta5 36Saforo Samuel Kwame6 37Seidler Ladislav7 38Sůva Martin8 39Šlosarová Iva9

10 Teams & Competitive Structure 10 Module EUE43E: Commerce & Trade Teams Team No.Team Members:Team No.Team Members: Aška Ondřej Cholenský Jan 1 Gärtner Ota 6 Jeslínková Barbora Khaustova Nataliya Malá Pavlína Michková Adéla Saforo Samuel Kwame Barba Serrano Marta Cihelka Filip 2 Golenkov Alexander 7 Jordán Onrubia Estela Krofta Jiří Malec Karel Navas Gimenez Alvaro Seidler Ladislav Barchánková Kristýna Collard Alexia 3 Háková Anna 8 Karlach Jan Křemenová Lucie Maraulas Darius Nwaiwu Celine Chikodi Sůva Martin Brtníková Petra Fiala Tomáš 4 Hutchful Edwin 9 Kastl Jan Květová Pavla Marcoňová Barbora Otekhile Cathy - Austin Funke Šlosarová Iva Chán Petr Freitas Ana Margarida 5 Jelínková Kateřina 10 Khaustova Svetlana Landa Ivan Markovič Tomáš Perelló Alonso Marta

11 Simulation Briefing – e-Decisions: Periods 2+? HTM

12 12 Simulation Briefing… l £400,000 personal share £1/share £300,000 invested in “fixed capital” (fixed assets) u £180,000 for factory (non depreciating) u £120,000 for machinery & equipment depreciated straight line £4,000 per period £100,000 available for “working capital” to carry out trading activities i.e. run the business

13 13 Introducing Gema & Lucy...

14 14 Raw Material Stocks Finished Goods Stocks Production line 1 Production line 2 Gema Lucy Market Gema - price - advertisements Market Lucy - price - advertisements Customer (debtor) Pays 2 mths later (credit given 1 period)

15 15 Simulation Briefing l Production accounted for over decision periods that equate to 2 months (8 weeks) of trading i.e. 6 periods per year i.e. 6 periods per year l You & your team set up the company from scratch & play for 6 periods (i.e. 12 months of simulated management of your trading company) l Competitive Market Structure: Market 1 - Teams 1 to 5 Market 2 - Teams 6 to 10

16 16 Simulation Briefing - Management’s Objectives Maximum share value after 12 months (6 periods) of trading Factors affecting share value: Accumulated profits/losses to that date Market share (%) Borrowing in excess of £150,000 at that date (i.e. high gearing/leverage)

17 17 Business Simulation Share Prices Prague Gp A- 2009

18 18 Business Simulation Share Prices Prague Gp B- 2009

19 19 Business Simulation Share Prices – Euromaster 2006

20 20 Business Simulation Share Prices Euroman

21 21 Business Simulation Share Prices Euroman6B

22 Simulation Briefing – Decisions: Period1 only? 22

23 Simulation Briefing – e-Decisions: Periods 2+? 23

24 Simulation Briefing – Decision 1: Team Name? 24

25 25 Business Simulation Production Process 400,000 £1/share = £400,000 share capital £300,000 Fixed capital£100,000 Working capital Raw Materials (plastic granules) Premium £360/1000 kg immediate delivery immediate payment no order cost Basic £150/£300?/1000 kg delivery + 2 mths payment + 2 mths after (credit) £1,000 order cost Raw Materials Stocks Very important Period 1 Decision

26 26 Simulation Briefing – Products & Market Research ProductWholesale Price Market Forecast £’s/doll 1 Gema Doll £1.5050,000 dolls/period 2 Lucy Doll £2.5030,000 dolls/period Estimated total market = x the no. of teams in the marketplace. i.e. x 5 = 250,000 Gema /period x 5= 150,000 Lucy /period l Unsatisfied demand re-distributed to competitors

27 Simulation Briefing – Materials & Labour Manufacture up to 2 products (dolls) Product Material Labour kg mins kg mins Gema Lucy

28 28 Simulation Briefing – Decision 2: Materials? l Premium £360/tonne, all delivered in period ordered and paid in period received; no order cost… and/or l Basic material sourced at start of simulation at £150 - £300/tonne with variable delivery reliability? l Basic material ordered 1 period ahead of when needed and paid for 1 period after received; order cost £1,000 per order l Basic material costs 2% of average value to store l Basic material not received is on back order

29 29 Simulation Briefing - Labour l Recruited / made redundant 1 period ahead l 40 hr working week (max. 10 hrs overtime /week/operator) l £4.00/hr & £6.00/hr overtime l Labour start 85% (34 effective hours) but… Employing extra reduces efficiency Redundancies reduce efficiency l Can only change number of operators by + or – 50% in any period l 1 £6.00/hr needed per 10 operators (or part thereof) – do not need to be ordered & no overtime

30 Simulation Briefing – Decision 3: Labour? l Operators available in period (ordered previous period) need to be allocated to one or other production line. l Other manufacturing ‘overhead’ costs: Machine depreciation: £4,000 ‘Other’ production costs: £10,000 + £1/op.hr l Other business ‘overhead’ costs: Administration costs:£10,000 + £1,000/supervisor Warehousing costs: 3% average opening & closing Finished Goods Stock 30

31 31 Simulation Briefing – Decision 4: Finance? l Economic environment no inflation l Overdraft interest rate 2%/period (12% APR) max. £50,000: £5,000 penalty if exceeded l Flexible term loan interest rate 2.5%/ period (15% APR) – no restriction on borrowing l +ve cash balance needed in bank account at start of period before loan can be repaid l Borrowed & repaid in multiples of £10,000

32 32 Simulation Briefing – Decision 5: Marketing? l Either or both dolls? l How many can you expect to sell? l What price & what is price elasticity of demand? l What advertising & what is advertising sensitivity? 70% period placed & 30% residual effectiveness reduced if price changes effectiveness reduced the more used l Unsatisfied demand shared with competitors

33 33 Simulation Briefing – Decision 6: Research Information? l What is the market doing? l What are your competitors doing? l How well are they doing? l Competitors pricing information available free

34 34 Resources Available to You – 1 l Module Timetable – will agree decision times (critical) l Module Assessment – see handout & online l Business Management Simulation Manual (B.M.S.M.) ‘Bosscat Player’s Notes’ Chapter 1 (pages ) ‘Financial Accounts’ Chapter 2 (pages ) *’The Bosscat Accounts’ Chapter 3 (pages ) *Appendix 3 - Example Results Period 3 (pages 44 – 47) *cross referenced Appendices 1 & 2 Decision Sheets

35 35 Resources Available to You - 2 l Useful Textbook - McLaney, E. & Atrill, P Accounting: An Introduction. 2nd ed. Prentice Hall, Hemel Hempstead. l Optional Textbook - Pindyck, R. & Rubinfeld, D. (2009). Microeconomics. 7th Edition. Pearson Education International. l Online Business English/Czech translations l Decision Sheets Period 1 available as paper copy l Decision Sheets for Periods 2 and after (P2+) available electronically online

36 Teams & Competitive Structure 36 Module EUE43E: Commerce & Trade Teams Team No.Team Members:Team No.Team Members: Aška Ondřej Cholenský Jan 1 Gärtner Ota 6 Jeslínková Barbora Khaustova Nataliya Malá Pavlína Michková Adéla Saforo Samuel Kwame Barba Serrano Marta Cihelka Filip 2 Golenkov Alexander 7 Jordán Onrubia Estela Krofta Jiří Malec Karel Navas Gimenez Alvaro Seidler Ladislav Barchánková Kristýna Collard Alexia 3 Háková Anna 8 Karlach Jan Křemenová Lucie Maraulas Darius Nwaiwu Celine Chikodi Sůva Martin Brtníková Petra Fiala Tomáš 4 Hutchful Edwin 9 Kastl Jan Květová Pavla Marcoňová Barbora Otekhile Cathy - Austin Funke Šlosarová Iva Chán Petr Freitas Ana Margarida 5 Jelínková Kateřina 10 Khaustova Svetlana Landa Ivan Markovič Tomáš Perelló Alonso Marta

37 Revised Teams

38 38 Getting Started 1 l Elect a Team Leader l Team Leader - responsibility for operational issues for your team: 1. Give your team a Name? Team Leaders to these to me at: ‘Subject’ eg “Team 2? Name is ‘Devine Dollz’” 2. post e-decision sheets (2 +) on time - as attachments (see teaching & learning schedule) Late decisions excluded 3. Results ed back to Team Leader 4. keep your own e-file of all Decisions (D) & Results (R) for your Team 38

39 39 Getting Started 2 l Now... ‘Business Simulation Complete Budget Sheet’ ‘Business Simulation Trend Analysis Data Sheet’ l At end of simulation... ‘Business Simulation Inter-firm Comparative Analysis Data Sheet’ (but completed with Period 6 Data for all teams in your market) All Team’s in your market’s results for all periods

40 40 Getting Started 3 l......think about what you can do to develop a “Competitive Advantage” and consider what are likely to be the “Critical Success Factors” that you must get right if you are to be the most successful company? l Set yourselves some: 1. aims - guiding principles relating to how you want to see your business run (may need to be flexible) 2. objectives - approximate targets over time relating to achievements 40

41 41 Getting Started 4 l …get your decision support spreadsheets organised as soon as possible… using my basic templates to get you started l Experiment a little to see how the business responds to different tactics? 41

42 42 Getting Started 5 l Make 1st set of decisions (D1) on paper ‘Decision Sheet Period 1 only’ and get checked out by me before in here today? l Seek clarification - if needed? l Follow guidance in Teaching & Learning Schedule l Read the Business Management Simulation Manual – Chapter 1: PLAYERS NOTES

43 43 Bosscat Decision Sheet – Period 1 only

44 44 Bosscat e-Decision Sheet – Periods 2+ 44

45 45 Getting Started 5 Questions?

46 46 ‘Understanding Business’ The End Robert Williams


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