user manual

iBizSim: International Business Simulations iBizSim01: BM 2 P1

© 2005-2009 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany

User Manual



Note: This document has been formatted for double-sided printing.



1 The International Business Simulation iBizSim01 1

1.1 Structure and progression of the International Business Simulation iBizSim01 1

1.2 Tasks and organization of the team 1

1.3 Company policy 5

1.4 Analysis and evaluation of data - setting up the indices 5

1.5 The products 9

1.6 The markets 9

1.7 The development of demand 10

1.8 Conditions of payment 12

1.9 Image 12

1.10 Production 13

1.11 Personnel capacity 14

1.12 Machine capacity 14

1.13 Timetable for purchase, production and sale of products 15

1.14 Costs 16

1.15 Financing 17

1.16 Exchanging currencies 18

1.17 Summary of the effect of influencing factors 20

2 Decisions 21

2.1 Company decisions 22

2.2 Sales decisions 23

2.3 Purchasing decisions 27

2.4 Production decisions 28

2.5 Financial decisions 31

3 Annexes 33

3.1 Capacity calculation for period 0 34

3.2 Calculation of manufacturing costs in period 0 35

3.3 Determining the change in stock value in period 0 36

iBizSim: International Business Simulations Page I


PREFACE

This course is based on the International Business Simulation iBizSim01 of the series iBizSim: International Business Simulations developed by Prof. Dr. Ashok N. Ullal, Professor emeritus, School of International Business, Reutlingen University, Germany.

The course is designed to give groups of students working as teams the opportunity to build and implement an international business strategy for a simulated company operating in the world markets. The simulated company is located in Germany, has a production plant initially in Germany, manufactures initially two consumer products and sells these in four markets, Germany, U.S.A., China and India.

The course emphasizes strategic planning and controlling and expects the students to use in a very integrated manner their knowledge and experience from all the other business-related courses.

In the International Business Simulation iBizSim01 used in this course, the simulated com-pany that you will manage:

P u r c h a s e s raw materials and bought-in goods - invoices are drawn up in Euro

P r o d u c e s goods in the Germany - all costs arising are in Euro

T r a n s p o r t s the finished goods to the central store and to the sales branches in the various sales markets

S e l l s the products Alesa and Bordo in four markets in which the invoices are drawn up in various currencies

Currencies used

Market Germany U.S.A. China India

Currency Euro (EUR)

U.S. Dollar (USD)

Chinese Yuan (CNY)

Indian Rupee (INR)

The balance sheet, the profit and loss account, and the financial account will all be drawn up in Euro.

iBizSim: International Business Simulations Page 1


1 The International Business Simulation iBizSim01

1.1 Structure and progression of the International Business Simulation iBizSim01

Several companies in a particular branch of industry are in competition with each other. They supply the products Alesa and Bordo in different markets that are independent of each other. Each company manufactures the products it supplies, but there exists the possibility of buying in these goods.

The products are generalized consumer goods. Hence the simulation is based on the applica-tion of general business principles. Specific experience from particular branches of industry is therefore not necessary for taking part in the simulation. The products Alesa and Bordo will be described in detail below.

The structure of the production plant, sales and turnover in all markets, stocks of goods and cash, outgoing and incoming payments, i.e. all the information which is necessary for managing the company, will be found in the enclosed Management Report. It shows the economic and operating state of the company at the close of period 0; all the companies have the same opening situation.

The simulation is played in chronological periods, every four of which constitute a financial year. At the start of each period, each company makes the decisions that are to apply in this period. The decisions of all the companies are processed in a computer program, and the re-sults of each period are printed out for each company in a Management Report. From this report, each management team can see the consequences of its decisions. The report consti-tutes the basis of the decisions for the subsequent period.

One of the tasks of the company’s management team is to analyze the reports and to ascer-tain the interrelationships, as well as the factors involved, in order to establish a rational basis for subsequent optimal decisions.

All decisions have to be made in such a way that the long-term success of the company be-yond the conclusion of the simulation is assured.

1.2 Tasks and organization of the team The amount of information and knowledge necessary for the successful running of a company is continually increasing, and in addition there are inter-sectional problems and projects. This forces the management to delegate important duties to senior colleagues who in turn have to search for joint solutions. In order to reflect this trend adequately, in the International Business Simulation iBizSim01 all business functions are exercised by working groups (= teams). Hence the willingness of every participant to work in a team is necessary.

Your team will take over the management of one of the companies competing with each other. In industrial life, decisions are made on which the future success or failure of companies, and hence also of their employees, depend: in the same way, your team will now decide how your company is to be run. The decisions necessary for this will be made at the start of each



period. The owners of your company expect you to out-perform the companies that are in competition with you.

It is your task to:

1. Improve the market position of the company

2. Achieve a satisfactory level of profitability

3. Ensure the long-term viability of the company

In principle, the internal organization and allocation of responsibilities is left to the teams themselves. However, in the interest of effective decision-making in the given time per pe-riod, it has proved to be a good idea to allocate specific functions (for example in sales, fi-nances, production) to individual team members. In the areas of responsibility formed in this way, the group could prepare the decisions of the teams for subsequent discussion. Finally, every team must be able to reach a group decision: this means that agreement must first be reached on how the final decisions are to be made (e.g. by unanimous vote or by majority vote).

However, you should nevertheless take into account the following points when distributing the tasks:

1. If participants from the same real-life company find themselves in the same team, there is little point in transferring the familiar hierarchical chain of command to the simulation. If a member of the team, in real life in a high position, tries to push through his/her own view in the simulation in the same way as in the real world, and to deny the other team members any chance of developing, then motivation will die, and a major part of the point of participating in the simulation will be lost.

2. Not infrequently, one still encounters a certain friction between e.g. engineers and personnel in the financial departments, between personnel in production and those in sales etc, based on a lack of knowledge of the tasks and problems that other col-leagues have to cope with.

It might therefore be appropriate to allocate to the members of the teams tasks that are unfamiliar to them from the point of view of their training or activity in their company. If in the simulation, for example, a production engineer takes over the marketing section, whereas a director of sales is responsible for production, then a certain mutual understanding can be developed which will help to overcome friction in the company, a blinkered approach, as well as any departmental empire-building.



Whatever organization you choose, remember that it is important

for every member of the team to be involved as much as possible

in reaching the decisions.



Management Tasks

Raw materialsBought-in/semi-finished goods

Staff capacity

Machine-capacity Capital

3. Production and/or purchase of arange of certain products e.g

Alpha Beta

4. Absatz der Erzeugnisse aufunterschiedlichen Märkten

Market 1 Market 4Market 3Market 2

5. Analysis of the results

4. Supply and sales of the product in different Markets

1. Setting the goals of the companyPlanning of strategic and operational measures

2. Ensuring the availability of the necessary



1.3 Company policy One of your tasks in taking part in the simulation will be to develop your own ideas and objec-tives and to carry them through against the interests of the competing companies.

After your team, as the new management, has become familiar with the company and what is happening on the market, the owners will expect a clear statement of future long-term com-pany policy. Moreover, they will expect the establishment of measures (strategy), the pur-pose of which is to achieve the stated objectives.

The company is not rigidly bound to the policy established at the start of the simulation: however, any deviations from it need to be discussed and justified in the final discussion.

The following summary will provide you with examples of business objectives:

In production: Optimal stockholding, high degree of utilization of capacity, minimization of costs, an even utilization of capacity, minimal staff turnover.

In finance: Short-term and long-term profit maximization, low level of debt, self-financing, high yield on capital, distribution of high profits.

In marketing: Optimal satisfaction of customer demand, favorable image, steady growth, high quality, high market share, and constant ability to supply the goods, high turnover.

In the social sphere: Contented workforce, continuity of employment even when there are fluc-tuations in sales, identification of employees with the company.

When taking part in the simulation, a discussion of these widely varying objectives and the resultant conflict of objectives must not be omitted, even if the developing competitive ethos of the team means that, as a rule, the easily determinable factors "company profit“ or "profitability“ are selected as a measure of success and hence of "ability“.

1.4 Analysis and evaluation of data - setting up the indices The Management Report provided to you showing the opening situation and subsequently printed out at the end of each period provides a wealth of data, and gives each management team an overview of the success and situation of its company. A careful analysis will show whether changes have occurred in the various areas, and if so which changes. It will be ad-visable to consider what information can be represented by indices/statistics that are par-ticularly meaningful and that should be regularly drawn up.

In the analysis and processing of the data, the following points, for example, could be exam-ined:



1. In which areas of the company do bottlenecks exist? How significant are they? What short-term measures can be taken to optimize utilization, what long-term measures are there to eradicate the bottlenecks? What, therefore, is to be done?

2. Which of the indices appear really fundamental and should thus have particular atten-tion paid to them?

3. Which data should be collected in tabular form over several periods, or extrapolated?

4. Which data are suitable for graphical representation?

5. How is the progression of the curve of the diagrams to be interpreted?

6. What deviations from the planned or expected course of events are discernible?

7. What factors can cause the deviations?

8. How sensitive to these factors is the situation?

9. What effects do price changes have on demand in the markets?

10. What effect does expenditure on communication policy have in the markets?

11. Meaningful information could be supplied by relative figures. They provide relation-ships in the form of ratios between sets and sub-sets in the same period (e.g. the share of material costs in total costs. The reference of essentially different figures (e.g. difference and/or change in demand in each market). Index figures between es-sentially similar but chronologically dissimilar figures (e.g. personnel costs in period 1 / personnel costs period 0).

As a matter of principle, you are advised to use only the few essential figures as your indi-ces.

Particularly in commercial practice, indices cannot be more precise than the base data/figures on which they rest, and the ratio/relationship that exists between them.



Methodology of Decision-Making

Analysis of the past

Evaluation of ManagementReports over time

Current situation

Analysis of results ofthe current ManagementReport

Purchase of market informationType 1 Type 2Type 3

Forecast of future developments

Collection of future-orientated data

Purchase of market Business situationinformation and trendsType 4 reported by

Game Leaders

Finance plan Cost planYield planAgreement on and adjustment of individual plans

Processing of management information Planning of measures, including planning of alternatives if necessary

Purchasing plan Sales plan Production plan(Investment and personnel plan)

Acquisition of management information

Development of results planplanned profit and loss account, planned balance

DECISION

Analysis of resultscomparison of actual/planned figures



The Decision Cycle in the Management Game

Development of and agreement on individual plans

Assessing alternatives

Decision

Analysing results

Setting out/adaptation of objectives

Obtaining and evaluation of information

Etablishment/ adaptation of strategy

Planning measures/planning alternatives



1.5 The products Your company’s sales range comprises the products Alesa and Bordo, which may be produced within your company or be bought in. The products Alesa and Bordo, offered on all four mar-kets, are durable consumer goods. At the start of the simulation, their selling prices and sales figures are identical for all companies.

Alesa and Bordo may be characterized as follows:

• They are manufactured partly from the same raw materials, partly from different ones, as follows:

Each unit of Alesa requires 3 units Aurit and 1 unit Bekat

Each unit of Bordo requires 2 units Bekat and 2 units Calot

• They are manufactured on the same groups of machines, but require different production times per unit.

• Both products may be bought in, as finished goods which - thanks to strict quality control measures - are equal in quality to one’s own production.

• There is no competition between Alesa and Bordo as substitutes.

• Alesa is a product that has been available in the markets for several years and has devel-oped into a main generator of turnover. The well-tried and tested basic concept, which, when it was originally introduced, was considered a major innovation, has been largely re-tained. From time to time, attempts have been made, by introducing minor improvements and adaptations, to reflect ever more sophisticated requirements - particularly in the markets Germany and U.S.A. - but this has not prevented the interest of potential cus-tomers turning to newer products.

• Bordo is a mature product that corresponds to state-of-the-art technology. Bordo meets the high demands of the discerning consumer with high spending-power. It has earned high praise from consumer test associations and in technical journals etc. Bordo has been available in the markets for several periods and to date has fulfilled all expectations. So far the markets have been only partially opened up, and that to differing degrees.

1.6 The markets The products Alesa and Bordo are supplied on four geographically separate global markets, Germany, U.S.A., China and India.

All companies compete in these markets, but there are no further suppliers. Cooperation be-tween companies is not possible.

The markets are different in size and structure.

It is up to each company to decide in which markets it wishes to supply its goods. Sales branches have been set up in all markets. They are the pre-requisites for opening up and



supplying the markets. They fulfill all necessary functions such as processing esti-mates/offers and orders, after-sales service, customer care, service back-up, storage and dispatch.

The transport of products to the various markets causes different costs (see list of pa-rameters).

The size of the sales branches in the four markets is determined by the expected demand for Alesa and Bordo: this is fixed by expenditure in one period. The level of expenditure on a sales branch has no effect on the level of demand: it merely affects the capacity to process and deliver customers’ orders.

Please note that in the profit and loss account the costs of maintaining additional stores in the sales branches are not included under the heading “Sales branches” but are lumped to-gether with the costs of additional stores in the central store under the heading “Storage costs for finished goods”.

The companies attempt to build up long-term business relationships in the markets, a perma-nent presence on the markets is hence obligatory. The closing down of individual sales branches is not permissible, even when the situation on the market does not allow for costs to be covered on a short-term basis.

1.7 The development of demand

1.7.1 General In the first periods, the trend of the general economic environment in all markets remains the same. To date, there have been various predictions of the development in subsequent periods.

Customer demand for the products of a company is determined by

1. The decisions of the company

2. The decisions of competing companies

3. The general economic environment

4. Factors specific to particular markets

5. The reputation (= image) of the company.

The development of Alesa and Bordo in the markets may vary and can be influenced to a con-siderable degree by the decisions of the companies. Hence, the sales position of the individ-ual companies can and will deviate from the general situation in the overall markets.

1.7.2 Decisions As at the start of the simulation the products of all the companies are the same, special sig-nificance attaches to the companies’ sales policy decisions. Their aim is to firmly establish the name of the products and of the company in the consciousness of potential customers, to



create a competitive advantage for their own products, and last but not least to increase demand and sales at "reasonable" prices. In this, the demand and purchasing decisions of the customers will be determined partly by their experience with the degree to which the dif-ferent suppliers are able and willing to deliver the right goods at the right time at the right price.

1.7.3 Demand for Alesa and Bordo in the markets Alesa and Bordo develop differently on the markets. These developments can be influenced considerably by the companies’ decisions. Hence, the sales situation of the individual compa-nies can, and will, deviate from the general situation on the total markets.

Alesa was introduced a long time ago in Germany and not long afterwards in the U.S.A. In both markets Alesa achieved high turnover figures and great success. However, for some time now turnover in Germany has been stagnating, even the U.S.A. has in the meantime reached a high degree of saturation. Market resistance is forecast to grow particularly in Germany. For the coming periods pessimistic forecasts predict a considerable decline in de-mand in Germany, and with a slight time-lag also in the U.S.A. This trend will gradually accel-erate. In this, Alesa’s situation in Germany is likely to become more critical than in the U.S.A. To begin with, replacement sales will continue but will decline in the long run.

In line with declining interest on the part of potential customers, the level of personal pref-erences for Alesa in these markets must be expected to decline or disappear. This, however, also applies to the comparable products of the competition.

Alesa was introduced in China and India at a considerably later date. In these markets, the product can be considered as being in the mature stage. It has been possible to achieve such a level of consumer awareness of Alesa since its introduction that there is a preference for it over similar products of other companies. But this, too, applies to the competition.

Bordo, as a technically high-quality product, was initially particularly interesting for Germany and the U.S.A., in which potential customers are particularly receptive to new ideas, as ex-perience shows. The correct application of sales policy instruments has enabled the estab-lishment of a loyal group of regular customers. Competing companies, offering comparable products, have been able to do the same. In Germany and the U.S.A. lower turnover growth rates are expected. On the other hand, Bordo was introduced into China and India only at a later date: higher turnover growth rates can be expected in these markets, as the product is increasingly accepted by customers, leading to higher demand.

The forecasts are only valid while the economic situation remains constant, i.e. upswings and downswings will increase or decrease the expected quantities. A continuous observation of the markets and their developments will improve the level of information of the companies.

1.7.4 Effects of inability to deliver If a company cannot satisfy demand, i.e. if the demand in a specific period and in a specific market exceeds the supply, the following scenarios may develop:



1. The customers are patient and wait for late delivery at the start of the next period. Non-fulfilled orders are stored and hence increase the orders in hand of the following period.

2. Customers are not prepared to accept delivery delays. They cancel orders in part or in total.

3. The competing companies in proportion to their sales meet the unsatisfied demand.

Limited ability to deliver prejudices the image of the company. The damage to the image in-creases in proportion to the inability to satisfy the demand in that period.

It is difficult to win back in subsequent periods those customers who have drifted away as a result of this loss of image.

1.8 Conditions of payment The conditions of payment provide a basic value date of 90 days for sales in the markets.

Turnover figures are indicated in the balances of the pertinent periods as accounts receiv-able. Such accounts receivable in a foreign currency are converted into Euros at the ex-change rate valid in that period. There are two possibilities:

1. If the exchange rates are not forward fixed, the accounts receivable are entered on the assets side at the spot rate. Any exchange rate profits or losses are then indi-cated in the profit and loss account of the subsequent period.

2. If exchange rates are forward fixed, the accounts receivable must be entered at the forward rate.

It is assumed that at the start of the simulation payments from the export markets are made to the company’s head office in accordance with the contract, i.e. in the following pe-riod.

Factoring is possible (see “financial decisions“).

1.9 Image The market position of the companies, and thus also buyer behavior, are influenced by, among other things, image. By "image" we mean the sum total of all factors that contribute to the public reputation of a company. Cultivating this reputation can lead to an indirect influencing of customers, and to considerable favorable side-effects on the promotions side. The com-panies establish standards that - from the point of view of the customers - provide the best performance.

By adopting the following measures, companies can encourage the desired favorable attitude of the public:

1. Punctual delivery of goods ordered:



Punctual delivery is a strong sales argument. It is - rightly - taken for granted by cus-tomers. It therefore does not improve the regard in which a company is held. On the other hand, failure to provide punctual delivery damages the company’s reputation and worsens its image in proportion to the degree to which demand in the market cannot be met. Damage to image exerts an effect in the following period.

2. Motivation and qualification of personnel involved in marketing: The products are of a high technical standard and hence require explanation and guid-ance from the sales personnel. This puts the motivation and the qualifications of the sales personnel at a premium. They can be achieved by the training of sales personnel.

3. Continuity of prices: Customers show annoyance with, and lose faith in, companies whose prices are subject to major increases/decreases within one period, or whose prices fluctuate greatly be-tween periods.

4. Improvement of quality: Rising expectations of the customers and the efforts of the competitors require each company to pay increasing attention to quality and to efforts to improve it.

At the start of the simulation, all companies enjoy the same image. This factor has the value of 100. It is calculated separately for each market in each period. The image of the compa-nies affects the level of demand for their products: a good image can increase demand; a poor image can result in a major reduction in the demand for the products of a company.

1.10 Production The production program to be set up based on the means of production comprises the prod-ucts Alesa and Bordo. These products consist of different raw materials Aurit, Bekat and Calot and are produced in one stage.

As far as the financial position permits, it is possible to achieve a balance between demand on the markets and the necessary capacity by:

1. Production for stock

2. Adaptation of working time by introducing overtime (maximum 2 consecutive periods) Introduction/cancellation of a second shift

3. Changing the machine stock by sale or purchase of machines

4. Changing the number of personnel by appointments or dismissals

5. Buying in finished units of Alesa

6. Buying in finished units of Bordo

If demand exceeds available supplies of the products, surplus demand occurs with unfavor-able consequences for the company. If demand is lower than the supply of products available,



stockpiling is inevitable. While this increases the ability to supply products, it also ties up cash.

Company policy permits a reduction of capacity to 50 machines and the appropriate number of personnel, but not the shutdown of production.

1.11 Personnel capacity Every company has a basic provision of personnel (technical and commercial administration, skilled tradesmen, and similar) that is absolutely essential for maintaining the company’s op-erations. Wages and salaries of these employees, whose number is basically determined by capacity, are included in the fixed costs.

In addition, the company has available a workforce for production. At the start of the simu-lation, this workforce is sufficient for the full operation of the machines available. This pool of "productive" labor can be influenced by management decisions and also by other factors.

These are in detail:

1. The pool of labor decreases by a certain natural wastage per period (see Management Report)

2. Additional personnel can be hired to maintain the company’s productive capacity or in a phase of expansion

3. Companies may reduce the workforce by dismissals

If the pool of labor is insufficient to operate the existing machines and to produce the planned quantity of goods, one must reckon with machines standing idle. The production quan-tity is then reduced by a percentage corresponding to the shortfall of labor.

The level of personnel is given in the Management Report. In the event of the introduction of double-shift working, the number of personnel must be doubled to avoid machines standing idle.

Trained personnel can be employed in each shift. No employee may work a double shift, as the working day of any one individual employee must not exceed 10 hours including overtime.

Managers may arrange a maximum of 2 hours overtime per day. Agreements with the trade unions permit overtime working in two consecutive periods. After that, at least one period must be worked without overtime.

Companies can increase the qualifications of their production personnel by expenditure on employees’ continued training.

1.12 Machine capacity The number of machines available in any period is shown in the Management Report.

The machines are all the same.

The capacity of each machine is

⇒ Per working day (with normal shifts) 8 machine hours



⇒ Per working day (with overtime) 10 machine hours

⇒ Per working day (with double shifts) 16 machine hours

Each period covers one quarter with 60 working days.

The products Alesa and Bordo make different demands on production capacity. In period 0, the production times are

⇒ For 1 unit of Alesa 45 minutes

⇒ For 1 unit of Bordo 20 minutes

These production times may be influenced by lean production and by the continued training of production personnel.

The variable production costs (without depreciation) are calculated per machine hour and are given in the parameter list.

The useful working life of the machines is fixed in the parameter list. The linear deprecia-tion figures are calculated in each period as costs. The companies reinvest in each period the same amount that is calculated as depreciation. This means that depreciation does not exert an effect on the capacity of the company’s production departments.

1.13 Timetable for purchase, production and sale of products

Period n

Ordering ofraw materials

Ordering ofgoods to bebought in

Period n + 1

100 % of the raw material delivered in any period can be processed. Depending on the through-put time, a part of the quantity produced in can be delivered on the markets in the same period.

Delivery ofmaterials

Market 1

Market 2

Market 3

Market 4

Production of goods

Material stocks

Delivery of bought-in goods

Central store

Transport to the branch stores inthe markets and possibly deliveryto customers

100 % of the bought-in goods delivered in one period can be made available for delivery to customers in the same period.



1.14 Costs For the purposes of costing, the costs can be categorized as follows:

1.14.1 Variable Production Costs Those costs that depend on the quantity of goods produced. They are designated “variable production costs“.

It is assumed that these costs rise proportionally to the utilization of capacity, i.e. as a rule they remain constant per hour of production and hence per unit of production. The costs per unit will only change as a result of price changes for raw materials, a shortening of the pro-duction time per unit, the introduction of overtime or of a second shift, and similar.

Into this category fall the costs of:

⇒ Production materials

⇒ Production wages

⇒ Other variable costs (these are largely machine-dependent and are therefore calculated as cost rates per machine hour)

The wages for surplus production personnel, i.e. personnel not required in that period, are calculated as fixed costs.

1.14.2 Variable Marketing Costs Those costs that depend on the quantity of goods transported or sold. They are designated “variable marketing costs“.

Into this category fall

⇒ Transport costs

⇒ Variable costs of the sales branches.

1.14.3 Fixed Costs These are the costs that result from the degree of operational readiness of the company. These costs, dependent on real time (fixed costs), are basically independent of the quantity of goods produced.

These costs are not regarded as a single "monolithic block“ of fixed costs, but rather are subdivided as follows:

⇒ Product fixed costs, e.g. in the framework of product policy or communication policy

⇒ Sectional fixed costs. These include fixed costs of production. They amount to a fixed basic sum and, in addition, may depend on the available capacity of per-sonnel and machines. The same applies to the sales branches in the markets.

⇒ Company fixed costs for technical and commercial administration, sales etc.



1.14.4 Depreciation Depreciation occupies a special position.

⇒ When single-shift working prevails, ageing is the dominant cause of loss of value. Hence depreciation figures are fixed costs.

⇒ When there are two shifts, the useful working life is reduced because wear and tear then becomes the major cause (otherwise the useful life would remain the same as in single-shift operation).

Depreciation is nonetheless calculated as part of the fixed costs.

1.14.5 Stocks Goods produced within the company are entered with their variable production costs; bought-in products are entered with their purchase price. In the central store, in which at any one time, old stocks, bought-in products, and newly produced products may be stored, a weighted average value is ascertained. A weighted average value is also calculated for stocks in the sales branches.

1.15 Financing At the start of period 0, all companies possess the same amount of cash: this can be ascer-tained both in the framework of the liquidity account and in the final balance. The parame-ters state the minimum amounts of cash at the end of a period, as well as the maximum amount of indebtedness.

All decisions taken by company management affect the financial sphere and lead directly or indirectly to cash in-flows and cash out-flows

⇒ Directly in the same period: lean production, communication policy, etc

⇒ Directly in the following period: orders of raw materials, machines, etc

⇒ Indirectly e.g. by decisions in the framework of price policy

In addition, income and expenditure inevitably arise by e.g. re-investment of machine depre-ciation, withdrawal from banks of fixed-term deposits, etc.

1.15.1 Procurement of funding The companies have the possibility of procuring financial resources to cover planned expendi-ture

⇒ From the sale of manufactured or bought-in products (money owed to the com-pany, i.e. the turnover of a period, is shown in the balance as accounts receiv-able, these are paid by customers in the following period)

⇒ From the sale of accounts receivable (factoring)

⇒ From the sale of used production machines (disinvestments)

⇒ Reduction of stocks of raw materials and bought-in goods



⇒ Interest yield from fixed-term deposits with banks

⇒ Raising short-term credit (= overdrafts)

⇒ Raising long-term loans

1.15.2 Liquidity In each period, companies must be in a position to meet their payment obligations, i.e. expen-diture in any one period must not exceed the available financial means. Ideally, both amounts should be equal. While over-liquidity does no more than reduce profitability, under-liquidity threatens the very existence of the company. Under-liquidity exists when in any one period the financial means are insufficient to cover the planned expenditure.

The maximum debt-equity ratio (credit limit) is given in the list of parameters. Within these limits, you decide on the raising of long-term loans, or their level. In addition, any necessary short-term borrowed capital (within the limits of permissible indebtedness) is raised through overdraft facilities and repaid in the following period. Thus the overdraft credit of the li-quidity account corresponds to the short-term obligations shown in the balance. Under-liquidity exists when the credit limit for covering capital requirements is insufficient.

If a company is insolvent, the instructors running the business simulation reserve the right to

⇒ Wind up the firm, or

⇒ Grant a special credit to the firm, but only allow it to continue to play “outside the competition“.

The following considerations must be taken into account in liquidity planning:

⇒ Taxes due at the end of every period must be paid

⇒ Any dividends also occur as expenditure at the end of every period.

In every period the basis for the calculation of the debt-equity ratio (credit limit) is capital resources (ordinary share capital plus reserves, as adjusted for dividend payouts). At the end of the year in period 4, the basis for the calculation of the debt-equity ratio is capital resources (ordinary share capital plus reserves, as adjusted for dividend payouts and further adjusted for any accumulated losses).

1.16 Exchanging currencies In the Management Report the data will, at first, appear unfamiliar to you, as they are based on the Euro. This is unusual, but essential, as your company’s balance sheet, profit and loss account and financial results will be expressed in Euro.

You will hence have to use such exchange rates as:

⇒ 1 USD has a value of approximately EUR 0.7700

⇒ 1 CNY has a value of approximately EUR 0.0930

⇒ 1 INR has a value of approximately EUR 0.0170



At the start of each period, you will be notified of the exchange rates that would be appli-cable for that period.



1.17 Summary of the effect of influencing factors

Has affect on

Factor Demand Image Through-

put time

per unit

Fixed

costs per

period

Product-

ion time

per unit

Staff

turnover

Rejection

rate

Price policy

Communication policy

Product policy

Total Quality Management

Image

Payment of dividends

Training of sales personnel

Continuity of sales prices

Punctual delivery

Lean management

Production technology 2000

Continued training of personnel



2 Decisions When the management teams have become familiar with the strengths and weaknesses of the companies, they reach the decisions for the next period.

The Simulation Leaders will establish and notify you of a specific date and time for the sub-mission of these decisions. It is absolutely essential to abide by this deadline, as otherwise the decisions of the immediately preceding period will be used again.

The decisions fall into the following categories:

• Company decisions

• Lean management

• Payment of dividends

• Sales decisions

• Product policy

• Price policy - sales price

• Communication policy - advertising, sales promotion

• Distribution policy - marketing logistics

• Training of sales personnel - key accounts

• Sales branches

• Transportation

• Market research

• Purchasing decisions • Market research

• Purchase of raw materials

• Purchase of bought-in goods

• Production decisions • Planning of production quantities

• Appointment and dismissal of personnel

• Purchase or sale of machines

• Lean production

• TQM (Total Quality Management)

• Production technology

• Continued training of personnel

• Financial decisions



• Raising and repayment of long-term loans

• Deposits with banks

• Export factoring

• Exchange rate risk management

2.1 Company decisions

2.1.1 Lean Management The idea of introducing lean production has long been discussed by the directors of your company. Outmoded practices that have become fossilized in other sections of the company have led to the idea being pursued and to the transfer of lean management techniques to the whole company. Lean management is a management concept that is aimed at the greatest level of efficiency in all sections of the company. Among the major objectives are:

∗ Recognition and fulfillment of customers’ wishes as the primary goal

∗ Elimination of superfluous hierarchical levels

∗ Encouragement of responsibility of personnel

∗ Decentralization, adoption of personnel into the decision making processes (downward shift of responsibility)

∗ Greater flexibility through cross-sectional communication and co-operation

∗ Faster reaction times to changes in the markets

It is not easy to break up existing structures and to change behavior patterns. Yet lean man-agement is not a state, or condition, it is a continuous process of effort to increase the effi-ciency of the company, even if only in small steps. You too can try to put the ideas of lean management into practice in your company. Expenditure invested in this will achieve:

a) A reduction of throughput time of the products, hence also a reduction of stocks, more rapid availability in the markets, and a reduction in the amount of capital tied up.

In period 0, 33.33% of the production quantity was available to satisfy the demand in the same period when the following figures applied:

throughput time + transport and storage time = total throughput time

32 days + 8 days = 40 days

This figure of 33.33% is calculated as follows:

Deliverable part of finished goods = (length of the period – total through-put time) / length of the period.

Experts feel that, with lean management, the figures could be reduced to

throughput time + transport and storage time = total throughput time

15 days + 8 days = 23 days



This would enable a corresponding increase in the quantity delivered to the markets in any one period.

b) A reduction of the cost of fixed overheads

Experts are of the opinion that a 25% reduction of these fixed costs is possible.

2.1.2 Payment of dividends The shareholders expect from the companies a dividend as a commensurate return on their invested capital and their share of the company’s success. Dividend payments at the end of each period improve the company’s image, but at the same time reduce the company’s own capital and credit line.

Dividend payments that reduce the company’s available capital can lead to critical discussion in public; this in turn can affect the company’s reputation.

2.2 Sales decisions

2.2.1 Market research A market research institute can supply information on the competitor companies and the markets.

Prices for the various reports can be seen in the parameter lists. Expenses occur in the pe-riod in which the decision is taken, the market research reports are submitted at the end of the same period.

In the section "Sales" the following reports can be supplied:

∗ Type 1: Selling prices of all companies in all markets; absolute and relative de-viations of one’s own prices from average prices.

∗ Type 2: Expenses relating to sales branches of all companies, total sales of the products of all companies in the markets, market shares of own company.

∗ Type 3: Sum total of product advertising of all companies for all products in the markets; market share of own company.

∗ Type 4: Development of the general economic climate as well as specific devel-opments in the markets.

2.2.2 Product policy - product management Characteristics required of a product go beyond the basic use desired by the customer: they also include, for example:

∗ Increased functions, simplification, i.e. fewer parts subject to wear and tear, repair-friendliness,

∗ Improved design,



∗ Expansion of customer service and extension of guarantee,

∗ Product variations or innovations in order to differentiate products from those offered by the competition.

An integral part of product policy is, in addition to decisions regarding the range/assortment of products (to begin with, Alesa and Bordo), the planning of new products.

Expenditure on product policy increases demand in proportion to the degree to which it ex-ceeds that of the competition. Experts are of the opinion that in this way demand can be increased by a maximum of 15%.



Improved

customer service

Extended

guarantee

Environmentally

friendly packaging

Basic function

= Basic use

Improved

durability

Attractive

design

Fewer parts subject

to wear and tear

= Repair-friendliness

2.2.3 Pricing policy Pricing policy attempts to establish a relationship between the selling prices set by a com-pany and the possible quantity of demand. Price is only one - albeit a very important - compo-nent in a bundle of possible instruments/measures that can be applied to influence demand. The purchasing decisions of the customers can be influenced considerably by their experi-ence with the overall efficiency of a company (e.g. punctual delivery).

If prices are too low, there is a danger of reducing customers’ willingness to buy, as they could lose faith in the quality of the products.

If prices are set too high, particularly if they are not justified by advertising or quality, cus-tomers may feel tempted to switch to other, cheaper, competing products. In this sense, the decisions of each individual company, as well as those of the competition, exert an effect on the demand accruing to each company.



2.2.4 Communication policy - advertising, sales promotion Communication policy embraces all the measures a company adopts to inform and to convince potential clients in the market of the characteristics of the products - such as technical fields of application, economy, design, etc. They draw attention to the products of a company and serve to distinguish the products from others on the market, and to create preferences. Advertising and sales promotion directly affect the number of orders received by a company - the sum total of all expenditure of all companies influences the overall total demand. The level of expenditure on it determines the quality of communication policy. Expenditure is es-tablished separately for each product and for each market.

The effect of communication policy is immediate and there is a fading in the following peri-ods. It is therefore spread over the current and subsequent periods (carry-on effect), al-though the effect steadily declines. The greatest effect arises in the period in which expen-diture occurs. The parameter list indicates the degree of loss of effect. Experience so far indicates that an increase of expenditure over and above 8% of the turnover will not lead to any notable further increase.

2.2.5 Distribution policy - marketing logistics Marketing logistics is understood as the sum of activities adopted in order to be able to sup-ply or deliver the right goods in the right quantities to the right place.

2.2.5.1 Quantities to be transported At the start of each period, the companies decide which quantities of products are to be transported from the central store to the branch stores.

From the central store

⇒ The stocks available there at the start of each period, plus

⇒ Part of the products produced in the same period (the proportion of the prod-ucts available in each period for transportation and sale is dependent on the production time and through-put time), plus

⇒ The bought-in goods delivered in the same period

may be dispatched and delivered to customers in the markets together with the quantities available in the branch stores. If the transport decisions of the companies exceed the avail-able quantities, the planned level of transport quantities to markets 1 to 4 are reduced pro-portionately.

An exchange of stocks between the markets is not possible due to the distances involved. Return of stocks to the central store is not permitted.

The costs arising from transportation of goods from the central store to the branch stores are debited in the profit and loss account of the same period.

The transport costs per product and market shown in the list of parameters are applicable to small quantities. In all markets bulk transport is possible, which - depending on the quantities



of ALL products transported to THIS market - result in discounts (see list of parameters). The discounts are included in the accounts of the same period.

2.2.5.2 Sales branches The costs (expenses) of maintaining sales branches are divided into a basic sum (fixed costs) and a variable sum that must be increased when demand is rising in order to be able to fulfill completely all tasks, from the acceptance of orders to final delivery. When demand is declin-ing, reducing expenditure can reduce a sales branch in size. Hence the expenditure on sales branches represents the capacity of the sales branches to deliver the orders.

In the case of markets that have not been fully opened up, it is clear that fixed costs will represent a larger proportion than in those markets that have been supplied for some time. The fixed costs of the sales branches in the individual markets are given in the list of pa-rameters.

The effect of expenditure on reduction or increase in size of the sales branches arises in the same period. Expenditure on the sales branches may be reduced to the level of the fixed costs: however, a step as radical as this no longer enables orders to be received and proc-essed.

Minimum planned expenditure = (planned sales for Alesa + planned sales for Bordo) x variable costs + fixed costs

2.2.5.3 Training of sales personnel - key accounts Technical expertise and motivation of the sales personnel of one’s company can be improved by training in the qualities and possible fields of application of the products, as well as the required sales techniques. Detailed technical advice and counseling improve the regard in which the company is held (= image). You might also think of the training of particularly com-petent personnel responsible exclusively for looking after key accounts (key customers) and for the solution of their problems. These members of the personnel would be specialists in, for example, negotiating, financing, foreign exchange transactions, risk management, customs law and preference law, export calculation and export marketing. Additionally, they would be totally familiar with the mentality and customs of foreign customers.

The effect of sales personnel training on a company’s image depends on how far the training is superior/inferior to that of the competition. Changes in image of up to a maximum of 10% seem possible.

2.3 Purchasing decisions

2.3.1 Market research Prices and available quantities of raw materials and bought-in goods can change independently of the general economic situation and other factors. The higher the share of material costs in manufacturing costs of the products is, the more advisable it is to keep a close eye on the purchasing markets.



By acquiring market research reports, the companies can gain information on any trends in good enough time to include such changes in their decisions. Without market research, the companies will only be informed of changes once they have already taken place.

2.3.2 Purchase of raw material The level of production per period depends on, among other things, sufficient stocks in hand and/or prompts ordering of materials. If stock in hand plus materials ordered are not suffi-cient for planned production, then machines will be idle.

The purchase of raw materials entails a delivery period of one period. The material is paid for on delivery. Prices for materials are given in the list of parameters.

Raw material can also be purchased through a rush, or urgent, order. Material ordered in this way can be made available in the same period. Of course, costs for rush orders are higher than in the case of normal orders (see list of parameters). Surcharges for rush orders are entered in the value of stocks.

2.3.3 Purchase of bought-in goods To relieve pressure on their own production plant, companies can buy in finished Alesa and Bordo. They are stored in the central store.

The goods ordered have a delivery period of one period and the payment is on delivery.

Quantities available on the market are, as a rule, sufficient to supply the companies. Delivery prices are shown in the list of parameters.

2.4 Production decisions

2.4.1 Planning of production quantities In each period the companies establish the planned production quantities of the products, these quantities are limited by the capacity available in that period.

To adapt production capacity to demand, the introduction of overtime is permissible. Man-agement expressly orders overtime, and the planned amount expressed in machine hours is entered in the decisions sheet. The decision is valid for one period, and is effective directly. No more than 2 machine hours of overtime are allowed in any one working day. Overtime working leads to an increase in production wages: the increase is the overtime surcharge (see list of parameters). It also increases the variable production costs (among other things through necessary overtime working in auxiliary sections) but does not affect the deprecia-tion per period as the latter is regarded as determined by ageing (see list of parameters). Overtime must not be introduced for more than two consecutive periods. After that, at least one period must be without overtime.

The introduction of a second shift is possible, too, but only for the whole production section, not just individual machines: this doubles production capacity but then requires the hiring



and induction of a corresponding number of new workers. Shift work and overtime working are not permitted at the same time.

The introduction of the second shift requires one period of preparation, hence it cannot be-gin until the period after the one in which the decision to introduce it has been taken.

Double-shift production immediately increases:

⇒ Production wages by the extra payment for shift work,

⇒ The fixed costs of the section and the company,

⇒ The depreciation per period, as the useful working life is shortened.

Cancellation shift work takes effect immediately. However, the increased fixed costs remain for the whole period as a result of residual costs.

2.4.2 Appointment and dismissal of personnel Appointments are possible at the commencement of each period. Newly appointed personnel undergo induction/training in the first three months (= 1 period) of their employment, receiv-ing full pay while they do so, but during this time they do not contribute to output.

The appointment of a new employee requires a fixed sum (see parameter list) for such ex-penses as job advertisement, interview, and similar.

It is also possible for employees to hand in their notice, or be given their notice, in each pe-riod. Dismissals take effect one period after notice has been given.

Employees who have been given notice of dismissal remain fully available to the companies during the period of notice. They are dismissed at the start of the next period, i.e. they can no longer be actually employed in the period when their dismissal becomes effective. For so-cial reasons, they receive severance pay on leaving the company (see list of parameters).

Companies that frequently dismiss personnel must take into account that, as a result of the resultant poor reputation of the company, job advertisements in future periods will not at-tract sufficient applicants.

2.4.3 Sale and purchase of machines Purchase of machines may take place in any period, in order to expand production capacity. Only whole machines can be purchased.

Machines ordered have a delivery/installation time of one period. Payment is made on deliv-ery.

All companies can reduce their production capacity and hence the fixed assets by selling production plant. Proceeds from the sale of machines are usually lower than the book value (see list of parameters).

The decision to sell machines has a direct effect, i.e.

⇒ The capacity of machines sold is no longer available in that period



⇒ The proceeds are calculated as income in the same period

⇒ The profit and loss account is debited with any loss in the same period.

2.4.4 Lean Production

2.4.4.1 Total Quality Management (TQM) It is no longer sufficient to regard quality as the fulfillment of minimum standards, as to-day’s commercial world is characterized by ever increasing competitive expectations. Today, "quality" is seen as an all-embracing concept. It includes products and personnel, but also all the company’s procedures from planning and draft projects, production, through to market-ing and distribution.

In traditional quality control, errors arising at the planning stage are not discovered until it is too late: but the later the discovery, the more expensive it is to rectify the error.

A modern all-embracing system of quality control has the aim of

⇒ Recognizing errors at the earliest possible stage, or - even better -

⇒ Not letting them occur at all.

Expenditure on TQM (e.g. the formation of quality circles, quality system certification, and so on) enables you to

⇒ Reduce the rejection rate of faulty products (which can not be re-used) and

⇒ Improve the image of your company.

Optimists expect that an increase of image of up to 15% can be achieved by these measures.

2.4.4.2 Production technology Through investment in superior technology, but particularly through

⇒ Rigorous structuring of logistic process

⇒ Improved flow of information

⇒ Utilization of value analysis, kanban, etc

A continuous process of improvement can be achieved. On the basis of exhaustive analyses, experts are of the opinion that a considerable cost-reduction potential can be realized in production. Specifically, such measures can bring about a reduction of the production time per unit, up to a maximum of 20%.

2.4.4.3 Continued training of personnel TQM and lean production presuppose qualified and motivated personnel. The latter must be willing to work in semi-autonomous groups, to accept changing work demands, and to take on responsibility. They then enable the dismantling of superfluous levels of hierarchies. Pro-grams for the continued training of the work force represent expenditure that results in

⇒ A reduction of the fixed costs in production



⇒ A reduction of staff turnover and non-reusable rejects

⇒ A shorter production time per unit.

It is doubtful whether expenditure in this direction of more than 2,000 Euro per cap-ita/period is sensible.

2.5 Financial decisions

2.5.1 Raising short-term and long-term loans Within certain limits, companies can obtain short-term and long-term loans. The sum total of indebtedness must not exceed a certain proportion of the company’s own capital.

Short-term loans (overdrafts) do not have to be specifically applied for.

Long-term loans, on the other hand, do have to be applied for. The sum applied for is avail-able in the same period. The rate of interest for long-term loans is, as a rule, more favor-able than for overdrafts. Long-term loans are not subject to a time limit.

Long-term loans may be paid back in part or in total. To do either, it is necessary to enter in the decision sheet the notice to repay the debt(s). Redemption takes place in the following period.

2.5.2 Fixed-term deposits with banks If a company does not wish to use all available funds in any one period, it can make its finan-cial surplus available to the money market and invest it on an interest-bearing basis (see pa-rameter list).

These deposits are invested in the same period, in which the decision to do so is taken. This investment is always on a short-term basis for two periods.

2.5.3 Export factoring It is possible to arrange for the collection of all accounts receivable from customers in all markets through the services of a factoring company. Thus, return on turnover in the period of sale immediately becomes income. The fees (including interest and del credere) are given in the list of parameters. The account in the markets is paid at the forward rate of the per-tinent period.

2.5.4 Exchange rate fixing Sales activities in the markets are conducted in foreign currencies. The forward and spot rates for the pertinent period will be notified to you. The forward rate is the rate at which 90-day forward buying can be conducted. This means that the companies have the following alternatives:

I. At the conclusion of the sales contracts (e.g. in period n) the foreign exchange due to be received by the companies 90 days later (period n+1) can be sold at the forward rate. The proceeds from such a transaction are received by the



companies at the fixed rate of period n. Currency transactions of this nature give the companies a certain protection against exchange rate risk, but the commission, brokerage etc involved cost some 0.5% of the amount receivable. In this, it is assumed that the payment will be made in accordance with the provisions of the sales contract, i.e. on the agreed date.

II.If no forward buying transaction is conducted, receipts of foreign currency paid by customers in the period n+1 will be converted at the then valid spot rate. The spot rate of the period n+1 can, and as a rule will, deviate from both the spot rate of period n as well as the forward rate of period n+1. Depending on whether the spot rate of period n+1 is higher or lower, exchange rate losses or profits will accrue to the companies.



3 Annexes

• Capacity calculation

• Calculation of manufacturing costs

• Determining the change in stock value

Please note that these sample calculations are given to you only to show you the method of calculation and may not represent the actual values of any period.



3.1 Capacity calculation for period 0

Capacity available

Number of machines available 175 machines

Working hours / day 8 hours

Working days / period 60 days

Total capacity available 84,000 machine hours

Fully trained workers available 350 workers

Machine allocation 2 workers / machine

Capacity required

Production quantity Alesa 96,000 units

Bordo 36,000 units

Production time Alesa 45 minutes / unit

Bordo 20 minutes / unit

Capacity required Alesa 72,000 machine hours

Bordo 12,000 machine hours

Total capacity required 84,000 machine hours

Machines required 175 machines

Fully trained workers required 350 workers

Capacity surplus/deficit

available required surplus/deficit

Machines 175 175 0 machines

Workers 350 350 0 workers

The wages of workers who

• are receiving training,

• or cannot be productively employed due to poor utilization of capacity

are included in the fixed costs.



3.2 Calculation of manufacturing costs in period 0

Alesa Bordo Total

Production quantity 96,000 36,000 units

Production time 45 20 minutes / unit

Capacity required 72,000 12,000 machine hours

Total capacity required 84,000 machine hours

Machines required 175 machines

Fully trained workers required 350 workers

Production wage 16.00 EUR / hour

Total production wages 2,688,000.00 EUR

Effective production wage 32.00 EUR / hour

Raw materials required / unit Alesa Bordo Cost

Aurit 3 units 12.00 EUR / unit

Bekat 1 2 units 24.00 EUR / unit

Calot 2 units 25.00 EUR / unit

Cost of raw materials Alesa Bordo

Aurit 36.00 0.00 EUR / unit

Bekat 24.00 48.00 EUR / unit

Calot 0.00 50.00 EUR / unit

Total cost of raw materials 60.00 98.00 EUR / unit

Other variable production costs 40.00 EUR / hour

Production costs Alesa Bordo

Production wages 24.00 10.67 EUR / unit

Raw material 60.00 98.00 EUR / unit

Other variable production costs 30.00 13.33 EUR / unit

Production costs before rejects 114.00 122.00 EUR / unit

Rejection rate 5.00% 10.00%

Production costs after rejects 120.00 135.56 EUR / unit



3.3 Determining the change in stock value in period 0

Stock changes occur if within a period the value of the product quantities either produced or bought in does not correspond to the value of the product quantities sold. This is the normal case. In this, there are the following possibilities:

⇒ Stock increases, i.e. the value of the product quantities produced or bought in exceeds the value of the quantities sold. Stock increases are considered as proceeds.

⇒ Stock decreases, i.e. the value of the product quantities produced or bought in is lower than the value of the goods sold. Stock decreases are counted as ex-penditure.

As far as products actually produced by the company are concerned, only the variable pro-duction costs are included. The fixed costs as well as all sales costs are calculated as expen-diture in the period in which they arise.

At the beginning of period 0 the value of the finished goods in the central store and in the branch stores is:

Alesa EUR 120.00 per unit

Bordo EUR 134.00 per unit



3.3.1 In the central store Alesa Quantity Value Total value

units EUR / unit EUR

Initial stock 65,000 120.00 7,800,000.00

Delivery from production 91,200 120.00 10,944,000.00

Delivery of bought-in goods 0.00

Total stock 156,200 18,744,000.00

Stock value / unit 120.00

Transferred to branch stores 94,000 120.00 11,280,000.00

Final stock 62,200 120.00 7,464,000.00

Change in stock -2,800 -336,000.00

Bordo Quantity Value Total value


Initial stock 26,000 134.00 3,484,000.00

Delivery from production 32,400 135.56 4,392,144.00

Delivery of bought-in goods 0.00

Total stock 58,400 7,876,144.00


Transferred to branch stores 31,500 134.87 4,248,405.00

Final stock 26,900 134.87 3,628,003.00

Change in stock 900 144,003.00



3.3.2 In the branch stores

• Branch store Germany

Alesa Quantity Value Total value


Initial stock 2,000 120.00 240,000.00

Delivery by transfer from central store 35,000 120.00 4,200,000.00

Total stock 37,000 4,440,000.00


Decrease by sales 36,000 120.00 4,320,000.00

Final stock 1,000 120.00 120,000.00

Change in stock -1,000 -120,000.00



Initial stock 1,500 134.00 201,000.00


Total stock 15,500 2,089,180.00



Final stock 500 134.79 67,395.00

Change in stock -1,000 -133,605.00



• Branch store U.S.A.



Initial stock 1,500 120.00 180,000.00


Total stock 24,500 2,940,000.00



Final stock 500 120.00 60,000.00

Change in stock -1,000 -120,000.00



Initial stock 1,600 134.00 214,400.00


Total stock 10,600 1,428,230.00



Final stock 600 134.74 80,844.00

Change in stock -1,000 -133,556.00



• Branch store China



Initial stock 1,500 120.00 180,000.00


Total stock 18,500 2,220,000.00



Final stock 500 120.00 60,000.00

Change in stock -1,000 -120,000.00



Initial stock 2,000 134.00 268,000.00

Delivery by transfer from central store 3,500 134.87 472,045.00

Total stock 5,500 740,045.00


Decrease by sales 5,000 134.55 672,750.00

Final stock 500 134.55 67,275.00

Change in stock -1,500 -200,725.00



• Branch store India



Initial stock 3,000 120.00 360,000.00


Total stock 22,000 2,640,000.00



Final stock 1,000 120.00 120,000.00

Change in stock -2,000 -240,000.00



Initial stock 2,800 134.00 375,200.00

Delivery by transfer from central store 5,000 134.87 674,350.00

Total stock 7,800 1,049,550.00



Final stock 300 134.56 40,368.00

Change in stock -2,500 -334,832.00



3.3.3 Stock changes

Alesa Bordo Total

Central store -336,000.00 144,003.00 -191,997.00 EUR

Branch store Germany -120,000.00 -133,605.00 -253,605.00 EUR

Branch store U.S.A. -120,000.00 -133,556.00 -253,556.00 EUR

Branch store China -120,000.00 -200,725.00 -320,725.00 EUR

Branch store India -240,000.00 -334,832.00 -574,832.00 EUR

Total -936,000.00 -658,715.00 -1,594,715.00 EUR

user manual

Documents

germany ibizsim

simulated company

products alesa

euro goods

consumer products

close of period

subsequent period

various sales markets