Making Your first Decision With Sample of Biz-Café Decisions for The First Week Ted Mitchell

In this lecture You will 1) learn about the types of decisions 2) learn how you earn points in both the single-shot games and the practice games 3) be given a reasonable but NOT optimal decision set for starting the game 4) Learn to buy the professional market research

Hard to make smart decisions when you have no idea what the situation is Read the Biz-Café Case

Historical Information about likely Sales Revenue and Prices Ted Mitchell

Historical Demand and Revenue Week starting Daily M-F Sat Sun Total S&S Week Price Weekly Revenue Jan 1 1000 750 550 1300 2300 3.50 Jan 8 1150 720 510 1230 2380 Jan 15 1070 780 530 1310 Jan 22 1045 950 690 1640 2685 Average 1,066 1370 2,436 $3.50 $8,527 Demand and Price From Pat’s Old Coffee Shop Mature market with 100% customer awareness

Starting Biz-Cafe You are the owner of a Biz-Café You are the team leader (leader of a Team of ONE, you) You get a loan of $25,000 to start the Biz-Café The goal is to maximize cumulative profits (Retained Earnings on the Balance Sheet) Not just the net income for the final week But the maximize the net income for every week Making a bigger profit from week to week is NOT sufficient! Your goal is to make the biggest profit that can be made!

There are Two Types of Simulations 1) a Practice Game with lots of opportunities to replay decisions (Groundhog Day effect) To get the points for playing a practice game you must finish the simulation normally 8 or 16 decision periods The goal of the practice game is for students to experiment with different choices and prepare a strategy for the Single-Shot game. 2) a Single-Shot Game with NO opportunities for any replays. (You’ll need to have a plan prepared in advance.)

Earn Points in a Practice Game 1) Finish the simulation and end the game with the results of the final week’s decisions If the simulation involves making decisions for 16 simulated weeks then finish the practice with a balance sheet for month 4! You will be participating in several different games (scenarios). Finish each one by completing the total weeks involved.

Earn Points in a Single Shot Game Make as much net income each week as you possibly can and increase your retained earning to the maximum amount you can The bigger your retained earnings at the end of the game the more points you will earn If you have average retained earnings you will get the average grade for the class If you fail to make a positive cumulative profit (a positive retained earnings) then you get zero points You will be given target goals for the different games you will be playing Example: To earn a grade of A- you must Reach an awareness level of at least 80% and have a retained earnings of at least $30,000

Three Types of Decisions 1) Start up Decisions Renting the Floor Space Buying Furniture (choose the style) Buying an Espresso Machine (choose the size) 2) Weekly Business Decisions Management Marketing Operating Decisions 3) Special Incident Decisions Buying insurance, market research, renovations

1) Start Up Decisions You only make these decisions once! Choose a Name Optional Choose a Logo Not Necessary Rent The Floor Space Required Choose The Style of Furniture Choose the Size of Espresso machine (dual or quad) You only make these decisions once!

2) Making a Weekly Decision You make your decisions for next week at the end of the current week When making Decisions for Week Number One, #1 You will be in Period #0 You must advance the game to week #1 in order to see the Results and Outputs of Your Decisions for week #1 When you are finished reviewing the results of your decision for week #1, then you will be making decisions for week #2. You are at the end of week #1 when you make decisions for the operation of the café in week #2 You must advance the game to week #2

Your Business Grows and You will change you decisions over the span of the game The goal is to find an optimal set of decisions that will maximize Retained Earnings for each week the business is open The decision set that is optimal in week #1 will not be the optimal decision in week #15 The game is a moving target

Weekly Decisions Always Include Managers Weekly Salary Number of Servers to Hire/Fire Server Hourly Wage Price Tag for a Medium Cup Type of Newspaper Ad Number of Daily Radio Spots Hours per Day (starts with a Five day week) Quality of Coffee Pounds of Coffee to order Number of Cups to order

‘Reasonable’ Decisions For Week 1 Managers Weekly Salary $610 Number of Servers to Hire/Fire 20 servers Server Hourly Wage $9.00 Price Tag for a Medium Cup $3.50 Type of Newspaper Ad General Awareness, $200 per day Number of Daily Radio Spots 5 per day @ $40 per spot Hours per Day (starts with a Five day week) 8 am to 10 pm Quality of Coffee Best, $6 per pound Pounds of Coffee 40 pounds Number of Cups 20,000 medium cups with Logo

If you do not change the decisions Then they will remain the same each week.

Type 3) Special Incident Decisions Depending on The Learning Objective for the game There will be different types of one-off decisions Buy insurance or not Buy a professional market survey or not Buy a pastry oven or not Advertise Fair trade Buy a Coffee Roaster Choose type of entertainment Renovate Furnishings Deal with Sexual Harassment Deal with angry customer

Any Special Incident Only occurs once during a game Buying insurance or not only occurs once per game Choosing to sell pastry or not only occurs once per game There is no second chance to see the incident again. The consequences of the incident decision last for the duration of the game In a Practice game you can repeat the decision in order to learn the consequences of your decision about the incident (the groundhog day effect) In a Single Shot game there is no second chance and you live with the consequences for that entire game.

Any Questions on The nature of The Decision Making in Biz-Café? Remember it is a moving target. The market is growing, competitors are reacting, special incidents will occur!