1. Prosper 2013
Introduction
Copyright Virtual Management Simulations

2. The Challenge
A fledgling retail business has been trading for just one year. The company sells its core product from a network of outlets, either owned or rented, in a number of regional locations throughout the UK.
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 sales.
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. Growing the business will be challenging, as there is competition from rival companies for both customers, and for the acquisition of outlets from which to sell their product.
The environment the company is operating in is a realistic scenario, reflecting the current state of the economic climate in the UK today, and changes as time progresses to provide a realistic and dynamic challenge for the new management team.
The decisions to be made, and fate of the company, rests in the hands of the new management team.

3. Key Objectives And Strategy
The key objective of the new management team is to improve the value of the company.
The value is measured by a number of assets, such as the company cash account, fixed assets and investments.
STRATEGY
To achieve their objective the management team will need to develop a business strategy to :-
Keep shareholders happy
Increase market share
Expand the company's network of outlets
Achieve profitable growth across the company's operational outlets
Manage company overheads efficiently
Keep customers happy
This 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 company's strategy will need to be revised as performance changes.

4. Environment, Strengths & Weaknesses
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 economy as it is today, both from a financial viewpoint (interest rates, overdraft limits etc), and in terms of the characteristics of different locations in the UK including :-
Availability of land upon which to build new outlets
Potential customer base
Sales margins achievable
Rival competition for both land and customers
The affect of promotions
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)
Current operational outlets
Future profit

5. Constantly Changing Scenario
The UK economic environment the management teams are operating in is based upon a realistic scenario, and is constantly changing, challenging the management teams to keep updating their business strategy.
The company share price can be influenced by external factors.
Interest rate and tax changes affect consumer demand, margins, land prices and rival competition.
Borrowing limits can affect the company’s expansion plans.
Also, as happens in the real world there are random, unforeseen, events that can occur.
Supplier issues have an impact on sourcing the company’s product.
Personnel problems have an impact on managing operational outlets.
Rival competitors can enter/leave the market.

6. Timeframe Decisions are made each quarter, also called periods.
There are two 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).
Growing the business will be challenging, as there is competition from rival companies for both customers, and for the acquisition of outlets from which to sell their product.
The environment the company is operating is a realistic scenario, based upon the state of the economic climate in the UK today, and it changes as time progresses to provide a realistic and dynamic challenge for the new management team.

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 looking after the company’s shareholders, and managing the assets of the company.
OVERHEADS
The Overhead Manager is responsible for developing an effective marketing strategy to increase the company’s market share, and for staffing the support service departments efficiently.
PROCUREMENT
The Procurement Manager is responsible for expanding the company’s network of operational outlets. This is achieved by buying land upon which to build new ‘owned’ outlets, and for securing rental outlets.
OUTLET MANAGEMENT
It is crucial to the success of the business to manage the company’s existing operational outlets as profitably as possible. This will involve many duties, including setting sales prices, allocating suppliers, employing appropriate staff and instigating promotional campaigns.

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.
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 network of operational outlets, by means of decisions on the Procurement Screen. This may involve utilising the company's overdraft limit.

9. Overhead Decisions (Marketing)
The management team are presented with a forecast of the availability of new areas of land upon which new company-owned outlets can built. The market forecast covers 5 geographical regions across the UK up to and including one year ahead.
The management team also have some basic knowledge of the characteristics of each regional location, in relation to customer base, competition etc. However, at this stage they have no specific details about the actual areas of land available.
The task of the marketing department is to determine the specific details about the areas of land in their target locations. This will include land price, competition for the land, potential sales, competition for customers, potential costs, sales price and profit.
DECISION: Whether or not to increase the size of the Marketing Department.
A larger Marketing Department can undertake more land appraisals, and increase market share.
DECISION: Into which geographical locations to target Marketing Department effort.
The number and location of the areas of land researched is a function of the size of the Marketing Department, and into which locations the marketing effort is directed.
A long term marketing strategy is needed as marketing effort can only be moved between locations by a fixed amount each quarter.
Detailed information about the areas of land researched will be made available in the following quarter so that a decision can be made about which, if any, areas of land to try and acquire.

10. Overhead Decisions (Other)
To be a successful business, not only must the company's network of operational outlets be managed profitably, but it is essential to manage the company's overhead departments as efficiently as possible.
As well as Marketing, which identifies potential new customer bases, the work of the staff in the Buying, Human Resources and Head Office Departments has a direct impact upon the profitability of the company's operational outlets.
Buying staff are responsible for ensuring that the product the company sells is delivered to the right outlet at the right time, and at the best possible price. Their work has a direct impact upon outlet buying costs.
Human Resources staff are responsible for training the company’s workforce, and personal matters. Their work has a direct impact upon sales in the outlets.
Head Office staff are responsible for functions that affect the running costs in the outlets, such as accounting and IT.
DECISION: The number of staff required for the Buying, Human Resources and Head Office 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 budgeted sales turnover in the quarter.
Understaffing of the departments can increase costs and reduce sales.

11. Procurement
Depending upon where the company's marketing effort was targeted in the previous quarter, a number of specific areas of land will have been identified in one or more of the 5 geographical locations, upon which the company can build new 'owned' outlets.
In addition, a selection of rental opportunities have also been found across the UK, but not based upon the actual marketing effort as their identity and characteristics is assumed to be already known.
For each potential outlet comprehensive details have been extracted about land price, potential sales, rival competition and projected profits i.e., a full marketing analysis.
The Procurement Manager must decide which potential outlets to try and acquire through competitive bidding.
DECISION: To decide whether or not to try and acquire, through competitive bidding, owned or rented outlets based upon the marketing information provided.
This will involve setting competitive bids based upon the anticipated rival competition and the company's available cash reserves.

12. Outlet Management Decisions
Having established a number of operational outlets, it is essential that they are managed as profitably as possible to improve the company's operating profits.
DECISION: To decide whether or not to cease trading in an outlet.
Owned outlets can be closed down, normally if they are not performing as required, or sold off if an acceptable bid is received from a rival company.
Rental outlets can be closed down by terminating the rental agreement.
DECISION: A preferred supplier has to be chosen for each outlet.
There are a number of suppliers to choose from. Allocating a local supplier can reduce buying costs.
DECISION: A retail manager has to be chosen for each outlet.
Retail managers are vital to the successful running of an outlet, and in particular the level of actual sales achieved.
A selection of retail managers with differing backgrounds are available, and its essential to try and choose the ones whose experience matches the company’s business i.e., the product being sold.
DECISION: Set the sales price for the company's product, and decide whether or not to introduce promotional campaigns to boost sales.
Using marketing and past performance data the management team need to try and set the sales price that optimises outlet profits. Sales may also be boosted by using promotional campaigns, such as incentive and/or advertising schemes.

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