service challenge an exploration of business this computer simulation gives you and the others: an...
TRANSCRIPT
Service Challengean exploration of business
This computer simulation gives 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
The SimulationThe simulation consists of three stages:
• Preparation• Decision-making• ReviewPreparation
– Familiarisation– Organisation– Consider objectives– Consider strategies
Decision-making– Submit Decisions– Simulate– Analyse Results– Replan
Review– Discuss & Compare Results
The Situation
• The company is a subsidiary
• has been operating for several years
• provides three services (Level 1, 2 & 3)
• involving two resources (A & B)
• all costs & prices are a universal currency
• companies are in direct competition
You will run this business for several periods, each of which represents one trading year
The Services
Level 1 (the best and most recent)
Level 2
Level 3 (most basic and oldest)
Each service is bought by a different group of customers and there is no interaction between the groups.
Also, each service makes different use of resources, has different potential and different marketing needs.
When selling your service you must ensure you service existing customers and attract new customers.
Each customer will purchase several days service from you each year.
MarketingYour marketing decisions affect the number of
customers who stay with you, the number of new customers and the amount of service they buy from you and these are influenced by:
– prices
– promotion
– quality of service
– resource availability
– market trends
– the actions of the other teams
The two types of customer (Existing and New) are influenced differently.
ResourcesThe resources consist of a combination of people and
machines and involve:
Resource A Resource B
Staff Costs 4000 AUs 2000 AUs
Asset Costs 15000 AUs 5000 AUs
Resource A Resource B
Level 1 1.0 0.0
Level 2 0.5 0.5
Level 3 0.0 1.0
Each service utilises the resources differently thus:
Other Resource Data
• A unit of resource provides a maximum of 200 days service each year
• Currently there are:– Resource A – 25 Units– Resource B – 30 Units
• If resources are short Resource A can be used in place of Resource B but not visa versa
• Depreciation - 20% /year• Resource quality (but not productivity) can be
improved by investment and this investment is split equally between:– Training staff (cost)– Improving assets (capital investment)
Financial Data
• interest paid on overdrafts - 20% per year
• interest paid on loans – 16% per year
• interest earned on cash - 10% per year
• mandatory dividend - 10% of Equity
If Capital Gearing Exceeds 50% then the interest paid may increase substantially
• taxation is 50% and paid the following year
• general overheads – 50,000 AUs/year
• promotion costs - decided by you
Decisions
For each service separately
• price
• promotion
For each resource separately
• number of new resources
• investment in Quality Improvement
And in general
• new bank loans
Use the decision form supplied and complete it carefully and legibly and hand to the simulation controller at the specified times.
ResultsResults are returned to you in three stages:Preliminary Results
– demand (days) & sales income for each service– sales income, operating profit & cash/overdraft
Company Reports– Client Summary– Resource Summary– Profit & Loss– Balance Sheet– Key Ratios
Business Research– Market News (prices & market shares)– Company Reports– Company News
Observations
• it takes time to understand• but the business still has to 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!
Final Year Result
Team Name
Sales Income
Net Profit
Earnings
Total Equity
Cash/Overdraft
Income Growth %
Return on Assets
Return on Equity
Capital Gearing
Final Year - Market Position
Team NameLevel 1PriceMarket ShareContribution
Level 2PriceMarket ShareContribution
Level 3PriceMarket ShareContribution
Cumulative Results
Team Name
Sales Income
Net Profit
Earnings
Income Growth %
Return on Assets
Return on Equity
Worst Gearing
Efficiency Losses
Team Name
Excess Promotion
Sales Losses
Gearing Losses
Idle Resource Cost
Resource Transfer Cost
Disposal Loss
Total Losses
Operating Profit
Potential Profit