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
familiarisation & organisation
deciding strategies & objectives
submit decisions
effect simulated
get & review results
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 thousands of $
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
accounts receivable 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 Production Overheads - $3 Depreciation - 10% /year
Product A = $40
Product B = $30
Production Overheads - $3
Depreciation - 10% /year
Sales Staff - $25 each/year
General Overheads - $2000/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/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
accounts receivable 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 Company Reports Business Research
demand & inventory for each product
operating profit & cash/overdraft
Company Reports
Income Statement
Equity, Assets & Liabilities
Financial Ratios
Business Research
Market News (prices & market shares)
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
Financial Leverage
Capacity

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

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

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