01 - Mousetrap 2012 - User Guide

8/13/2019 01 - Mousetrap 2012 - User Guide

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The Mousetrap 2012 User Guide

Copyright 2012 Tycoon Systems Ltd - page 1

Presents

Mousetrap 2012


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The Mousetrap Interactive Business SimulationAn advanced management training toola dynamic, interactive simulationwhich emulates real business issues in an entrepreneurial setting.

This simulation is a browser-based, Real-Time, Multi-Player businesssimulation, which runs on high speed servers in the USA and Europe. In this

way we can deliver results instantaneously & simultaneously to participants allover the world.

The Mousetrap business simulation is athttp://confluence-2012.industrymasters.net/

Objectives : The objectives of this simulation are to impart an understanding of

a. How to make decisions about the markets to enter

b. How to position your offering so as to attract customers to it

c. How to finance your business throughout its existence

d. How to scale uporganically and inorganically

e. How to manage competition

Your performance will be measured as a stock price. This is a function of yourcompanys profitability: the decisions you take will add or destroy value for yourshareholders. You will take management control for a number of businessquarters or business months, and your decisions in the marketplace over thistime period will affect your share price.

Choosing to invest and develop certain product markets, setting higher or lowerpricing and marketing levels, or devising a quality, HR or R&D strategy aresome of the areas you can decide on to build your new business plan - andincrease profitability, leading to a higher stock price for your venture.

Your competitors will react to your decisions according to their own strategicbusiness planthis is often a closely guarded secret. With careful study of their

management decisions during the course of the simulation - and the followingnotes - you may find some clues to their approachand use this to beat themin the market.

You will be under a constant time pressure to make decisions andunderstand the evolving competitive environment. You will not have all thetime you need to come to what you may consider to be the best decisions.

There is no single correct answer or solutionyou will make a range ofdecisions which will contribute to progressor decline. The system isextremely dynamic and will react to the choices you make.

These notes assumes that you are

a. on the Mousetrap simulation website athttp://confluence.industrymasters.net/

b. you have registered as a userc. you have logged in, using the username and password given to you
http://confluence-2012.industrymasters.net/http://confluence-2012.industrymasters.net/http://confluence.industrymasters.net/http://confluence.industrymasters.net/http://confluence-2012.industrymasters.net/


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GETTING STARTED

LOGGING IN TO THE SYSTEM

You cannot do anything until you are logged in to the systems running on ourservers. This is a browser-based, real-time simulation, which requires allparticipants to be logged in, and also that they click the participate button to join

the business game.

The home pagehttp://confluence-2012.industrymasters.net/is shown below.

Click the button Loginor the link Login to navigate to the page for logging in.

Alternatively go directly to

http://confluence-2012.industrymasters.net/loginclc.php?

The Login pageis shown below.

Enter your assigned user name andpasswordand click Logon

Your username will be the parimary e-mail ID with which you registered.

Usernames and passwords are CASE SENSITIVE.
http://confluence-2012.industrymasters.net/http://confluence-2012.industrymasters.net/http://confluence-2012.industrymasters.net/http://confluence-2012.industrymasters.net/loginclc.php?http://confluence-2012.industrymasters.net/loginclc.php?http://confluence-2012.industrymasters.net/loginclc.php?http://confluence-2012.industrymasters.net/


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ENTER NOW and then PARTICIPATE

As soon as you login, the following page will be visible to you.

1. Click Enter Nowon the above page to enter the simulation.

2. Click Participateon the above page to start playing.

TIME GIVEN TO MAKE BUSINESS DECISIONS

All players must log in 15 minutes in advance of their preferred time slot. Thesimulation will run 20 quarters over 60 minutesthus the time available to makedecisions will be 3 minutes per quarter. Therefore, it is strongly recommendedthat you carefully peruse through all elements of this guide before you start playing.The first 15 minutes prior to the commencement of your 60 minute slot is thestartup phase elaborated below.


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WHAT YOU NEED TO DO

Your company is a new entrant into a market with at most 50 other new entrants.

You have the choice of starting your business by investing into one or more of 9available sectorsTEXTILE, APPLIANCES, ELECTRONICS, WOOD & PAPER,METAL, AUTOMOTIVE,MACHINERY, CHEM & ENERGY and AEROSPACE.

To start, you need a clear business strategy (see the following pages)including :

Where do you want to compete? Which product-markets do you want to investin? How do you decide this?

How will you compete?What competitive advantage can you build? How will youposition your company? How will you compete on the dimensions of quality,innovation, staff, customer service levels, and sustainability? What valueproposition are you proposing to your customers? Set your pricing and marketing

policies.

Each quarter the competitive landscape will change.As the simulation proceeds, your competitors will be taking decisions that mayaffect you negatively, so you may need to reactre-set prices, rethink marketingspend, reset your strategic initiatives, make decisions about additional product lineinvestments, expansion or rationalisation (upsize and downsize), relaunch aproduct range - or even product-market withdrawal (liquidation).

Tactical adjustmentsCheck your business and financial performancethroughthe wide array of reports available to youToo much inventory? Reduce prices?Increase marketing spend? Products seem outdated? Relaunch? Market is over-crowded (Supply levels)? Prices falling? Withdraw/liquidate? Attack with a salesdrive at lower prices / better value proposition?

Your business performanceis reported in real time, and summarised in a stockprice. How do you compare to your competition? How are theysucceeding?

THE START UP PHASE

During the InitialStart-Up Phase, your job is to invest capital into an initial productportfolio. Some of the questions above will not apply yetbecause you and yourcompetitors are starting from a zero base, so you have no clues as to their

strategies and business positionsYour ability to invest into products will be constrained by your investment budget;you may invest into as many products as you wish subject to the investmentbudget. Alternatively, you may choose to not exhaust your investment budgetupfront and retain some for diversification later in the game. Here too, there is noright or wrong strategy.


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Your Companys Starting Position

Your Company Screen

Every company:- Begins with a market cap of 300M and has a share capital of 300M

- Is not invested into any product and has a AAA credit rating

- Has an investment budget of 540M.

Has the following initial balance sheet position

Initial Investment Budget = Share Capital + Debt Limit


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COMPANY SCREEN :

A. Your Company Name and Time Period

B. Investment budget and credit rating

C. Financial Planning, LT and ST debt, share

issues and buyback.

D. Product Module: Manage Prices,

Maintenance Spend, Marketing, Expansion

and Production Decisions

E. View Accounting

See real time balancesheet, P&L, cash flow statement and

corporate ratios

F. Invest NowDiversify into new businesses

G. View ChartsGraphic data for trend

analysis

H. Real Time ResultsView Competitor

Performance

I. Company Link Click here to return to the

opening screen

J. Industry SectorsViewing sector specific

real time market data

K. Quarterly ReportCompetitor comparison

across parameters in graphic format


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Launching Products

To launch a new product, follow the steps below:1. Click on the Invest Nowbutton on the left hand panel of the screen.

Thereafter, click on View More Detailsnext to the sector in which you areconsidering a product launch

2. Alternatively, if you are looking to launch a product in a particular industrysector you may click on the Industry Sectorson the left hand panel to

navigate to the screen that shows the product listing within that sector

3. Click the View Detailsbutton for the product that you are considering

investing into to navigate to a screen that shows the parameters that should

drive your product launch decision.

4. On this screen, you will see the most important parameters to aid yourinvestment decision, including:

Supply: Number of units of the product that are available to customers

for purchase

Demand: The potential market size by volume of the product

Supply Level: This represents the fraction of the total market demand for

that product that is already being met by existing players, if any.

Supply Level Forecast: This represents the fraction of the total market

demand that is estimated to be met if you decide to launch this productnow.

All the above parameters change in real time in response to competitions

moves; hence it is essential to monitor them continuously to be in touch with

market situation.

5. Click on the Launch Product button to close your choice of product. As soon as

you do that, the just launched product will appear on your company dashboard

as a separate business unit panel. Further, your investment budget will

decrease to reflect the investment you just made.

ATTENTION:The simulation engine automatically takes on debt on your behalf as soonas your cumulative invested amount exceeds the seed capital.

TIP:You should be wary about getting into an product with a supply level approaching 90%or greater than 90%


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STRATEGIC DECISIONS TO BE MADE DURING THE GAME

Product Markets :Wherewill you compete ?

Evaluate the profitability of your expected or current portfolio of activities, and

decide which markets look attractive to younow and for the future.Where can you make money ? Where are you losing money ? Can you rescue thepoor performers, or do you cut them loose ? What is the cost of exiting from amarket?

Market attractiveness will depend on the following and other factors:

The intensity of competition in those areaseffect of greater price competition

Current and expected supply levels (market saturation, market crowding)

The potential to dominate market share, and so influence pricing

Ability to build volumes and to achieve cost reductions through economies of

scale

Consult the Briefingslides that are visible on the left panel of your screen in Q0.

The following information about the market will be available to you in the Briefingslides:

- Market size by revenue for every product: Estimate at Q0

- Initial investment for every product: Actual at Q0

- Market size by revenue to investment ratio for every product

- Compounded Annual Growth Rate (CAGR) for every product: Estimate at Q0

- Gross Margin for every product: Estimate at Q0

Make a strategic plan for investing in attractive product-markets. How muchfinancing do you need ? How much is available to you at any time ?

Review the methods availableto you to Invest, Relaunch, Upsize, Downsize orLiquidate a business unit. There are costs associated with each optionthese aredetailed on screen at appropriate times

Strategic Positioning :Howwill you compete ?

You have a number of decisions to make and track constantly throughout thesimulation.

Pricing levels and Marketing Budget

Customer Service Investment

Investment in Quality Improvements

Innovation ad R&D investment

Training and HR Budgets

Sustainability & Corporate Social Responsibility


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Offering Value For MoneyWhen designing a price / value proposition, you will need to consider the relativestrengths of your products compared to competition, and price according to thevalue you will offer :

Focusing on a Sustainable StrategyDeciding How to compete will also involve setting a path that is rationalprofitablefirms often focus their efforts on one of two approaches as indicated in the chartbelow: a Cost Leadership strategy, or a Differentiator approach. Either can lead toprofitable and successful operations


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Setting PricesWhen setting prices, review current Contribution Profit Margins - as well as EBITMargins - by product. How do you compare to the competition ? Margins arefunction of Selling Prices and Total Product Costs. Offering lower prices mightbuildmarket share and sales volumes, which could lead to lower production costs aslarger scale economies are realised. There is a possibility that this might improve

profitability.Additionally you may wish to lower prices if you fear that inventories are too high.

On the other hand, raising prices could increase margins in certain marketswherefor example, there is very little inventory available for eager buyers.

Marketing spending will go hand-in-hand with pricing and inventory controldecisions. There is little point in setting a heavy spend on marketing if there is noavailable inventory in a rising marketyou will be able to sell most of your offeringat a relatively high price, with no promotion. However, if you are setting lower pricesto clear inventory, or to try to build market share, then a higher marketing budgetmight be appropriate to support that initiative

Use the Slider Tool in the SalesTabto change prices up or downafterchecking on the Competitors tab to determine a level that fits your chosenbusiness strategy

_________________________________________________________________

Price Hedging

You will not be able to set prices for the following products within the simulation:

- All Products in the CHEM & ENERGYsector

- Cotton, Polyester, Leather and Dyes in the TEXTILEsector

- Lead, Tin, Bauxite Ore, Copper, Iron Ore, Silver, Gold and Aluminium inthe METALsector

- Wood and Paper in the WOOD & PAPERsector


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All of the above are commodity products whose prices are fully determined bymarket supply-demand dynamics, which tend to be volatile.

To protect oneself from these market fluctuations, a participant can exercise theoption to hedge the prices of these commodities against market fluctuations.

Step 1: No hedging being doneX next to hedge price; both sales price are thesame.

Step 2: Find out the price that will get locked upon hedginghover mouse overX next to hedge price


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Step 3: To hedge price, click X next to Hedge Priceas soon as it becomes acheck, sales will happen at the hedged price from the subsequent quarter onwards.

Step 4: Verifying the effects of hedgingsales price on left not equal to sales priceon the right.Sales price on left = Hedged priceSales price on right = Current market price

Step 5: To turn off hedging at any point in time, click the check symbol next toHedge Price so that it becomes a X again. Price hedging will be discontinued fromthe subsequent quarter onwards and your price will again be subject to marketfluctuations.


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Marketing BudgetsThe Marketing Tab shows you marketing spend, market share and Inventory levels.Change the budget with the Slider Tool. If inventory is rising too fast, considerincreasing marketing, or cutting prices somewhat, or both.

_________________________________________________________________

CompetitionThe Competitors Tabshows who is competing in a particular product market, along

with their market share for that product, sales and cost data

___________________________________________________________________

ExpansionExpansion opportunities are explained in the Expand Tabwith advice andhurdle on suitability of the action proposed. Upsizing is offered where you havethe required budget available to invest and where your credit rating is above aminimum standard. Supply level forecasts and warnings are highlighted asnecessary.

Before

After


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Production Planning

The planned production for the subsequent quarter must be adjusted by taking intoaccount current inventory levels and your assessment of future demand. Inproduction driven industries, maintaining high utilization levels is often the key tolowering unit costs. If you plan to produce more than capacity, then your per unitcosts may be higher than normal as you will have to use overtime. This tab alsoshows your production output from the previous quarter.

___________________________________________________________________

Deciding on Maintenance Capex (Commodity Products Only)

Increasing maintenance capex has a number of benefits

- Utilization of fixed assets will rise as your machines break down less often

- Reduces customer churn that has a number of financial impactslower

marketing spend as fewer customers leave, and need to be replaced; as a

result, inventory levels will be maintained at a more profitable level.

- Effective capacity will increase, which means your assets will be more

effective

Reducing maintenance spending might improve short term profitability,

however

- Effective Capacity reduces as machines wear out faster

- Utilization dips as they break down more often

- Customer churn increases


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Strategic Position

By balancing service, quality, innovation, personnel policies and CSRrelative to aproposed price level, and compared to competitive offerings in the marketyou canincrease the appeal of your products and possibly gain market share.

Your settings should reflect your overall business strategywhat are you trying tooffer your customers ? High quality, innovative products as good prices ? Or a lowerquality, but still adequate product at a lower price point ? Increasing spending inthese areas will be reflected in increased costs, and will also have an impact ondemand.

The following diagram shows how increased spending in various areas of youroperation will impact your business and the financial statements. Lower spendingwill have the reverse effect.

For example, increasing the Customer Service budget will increase Demand (1stgreen bar in the diagram above)your customers will appreciate the extra care andattention you are offering; but will increase production cost (1stred bar in the diagramabove)because of the additional cost of supplying this higher level of service.

A successful combination of settings will depend on various factors like marketsaturation, debt ratio and relative competitor activityall of which fluctuate duringthe simulation.


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a. Customer Service:Higher levels of customer service will be expensiveprincipally extra staff costs.

This should be matched by setting higher prices, if you are trying to maintain profitmargins. In a cost leadership strategy, a lower customer service budget might beappropriate.

b. TQM/Product QualityHigh quality products are generally more complex, and require matching of higherindustry standards, so increasing production costs. A company with a high qualityposition should also move prices upwards, to maintain margins. A cost leader mightreduce investment into quality improvements, to cut costs.

c. R&D/InnovationIncreasing research and development spending should lead to more innovativeproducts, for which there will be higher demand from consumers. R&D costs will be

added to production costsso again, increases in R&D spending should bematched with a higher price strategy, so that profits can be maintained. A costleader may wish to set a lower R&D budget.


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d. HR/Training of staffExtra staff training will increase employee satisfaction and motivation levels, leadingto better operational efficiency. Productivity will improves, and important savings infixed costs will result. Production output will increase with increased trainingbudgets, but staff costs will inevitably rise.

e. CSR/Sustainability

Corporate Social Responsibility and Environmentally Friendly policies are becomingincreasingly important to global corporations. Such a policy will combine andbalance environmental, social and economic business objectivesthere is a cost,but consumers in different countries increasingly value such initiatives, and rewardCSR-focused companies with extra business. Additionally, many governments offersubstantial tax incentives to reward and encourage such behaviourwhich arevaluable to companies which are making profits.

In the simulation, a 40% tax reduction is available to those companies who chooseto invest in CSR policies

__________________________________________________________________

Additional InvestmentsOptional Special ProjectsThese options are further opportunities to differentiate your offering and to improvefinancial and operating performance over various parameters.

By investing in these special projects you will impact on demand, costs, cash flowetc, thereby improving your competitive position.

You may not have sufficient funds to invest in all projects an ddo all the other thingsin your plan.

a. Initial Position :

b. After choosing to invest in one or more projects:


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Guidelines on choosing Additional InvestmentsThe simulation has three kinds of additional investments:- Those which help you boost revenues

- Those which help you reduce costs

- Those which help you boost revenues and reduce costs

The choice of an additional investment is a long term decision and hence requires a careful thought on what isyour priority in the long run:- Are you going to be focused on topline growth in the long run?

- Is your focus going to be bottomline growth in the long run?

- Are both topline and bottomline growth important to you in the long run?

Before deciding to choose an additional investment that helps you achieve topline growth in the long run:- Make sure you have built up the additional capacity required to serve the incremental demand that arises

from the additional investment chosen

- Make sure that the markets you are serving are not already saturated; if this is the case, you will not see the

incremental revenue growth promised by the additional investment.

Before deciding to choose an additional investment that helps you reduce costs:- Scan the previous 2 to 3 P&L accounts to zero in on costs that have been denting your profitability

- Remember that you will have to trade off an increase in some other cost to reduce the cost that you have

zeroed in on

- A good approach to making cost savings investments is to do the following exercise:

o Am I willing to trade off a slightly lower EBIT margin for a substantially increased gross profit?

o Am I willing to trade off a reduction in gross profit for a substantially increased EBIT margin?

Remember the following about additional investments:

- They start taking effect after the time required to construct them has elapsed. Monthly durations specifiednext to these investments must be converted into quarters to determine when they will take effect.

- Additional investments that are a capital expenditure result in the creation of an asset in your BS whose

depreciation is charged to the P&L beginning the subsequent quarter, irrespective of the construction time.

Further, these investments are characterized by diminishing marginal returns with time, as more and more of

your competitors adopt them.

- Additional investments that are a one off cost get charged to the G&A costs in your P&L in the same quarter

that you invested into them

- Additional investments that are a monthly cost get charged to the G&A costs in your P&L beginning the same

quarter that you invested into them until their validity expires.


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STRATEGY and MARKETING ISSUES

Economies of Scale and ScopeWith increasing volumes of production or sales of a product or a range of products,central overheads and other costs start to spread across a larger base. The cost ofproduction per unit, or the cost of delivery per unit, will therefore start to come down.

If you can build market share and generate extra sales from the same cost base, thenthe average cost per unit will continue to decrease, and profitability will rise.

This is called Economy of Scaleunit costs will reduce to a level where the overheadpart of your cost structure is relatively small compared to the direct, variable costs ofmanufacturing, delivery or service. The cost reduction per unit is not a straight linerelationship, which will forever decline - more of an exponential curve which reachesan optimum operational cost level.

Market share-driven cost reduction is a major factor in creating profitable operations ina many businesses in the world today

Cost sharing benefits are also evident when you increase a range of products that canshare the same operational expense basesuch as a common sales force, acustomer service center, or a logistics system. This is referred to as the economies of

scope

Additional cost reductions may occur as a result of experience or learningsometimes these cost benefits are shared across industries (industry learning) astechniques and knowledge get passed around, or staff move between companies.

A company that is striving to become a cost leader in its industry will focus heavily ondriving costs down, including the application of economies of scale and experiencecurves.

A key driver in this simulation is relative cost advantage, because of the high fixedcost / high fixed asset investment nature of the industry. You can improve your costadvantage with greater market shares


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Supply Levels and Pricing - Market CrowdingFragmented Markets

In each product-market, manufacturers individually decide to invest in extra facilities,in order to satisfy the demand for the cars they produce. Overall industry demand is afunction of the size of the economy, and the rate of growth of this economy is relatedto the investment decisions of all the competitors in the simulation. The demand forindividualproducts is also related to the size of the economy, as well as to adjustingfactors such as pricing, price changes and value propositions.

The degree to which the market for each product is currently satisfied is referred to asthe Supply Level : the percentage of currentdemand that is satisfied by currentproducers.

As players expand and continue to invest in new production facilities, the supply ofcars available will increaseso the supply levelgoes up. Each new investmentdecision leads to the establishment of an extra production unit with a fixed capacitythe capacity increase is referred to as 1x, 2x, 3x etc .

If new competitors enter a segment with new investments, the market becomes morecrowdedand supply levels also increase. When supply levels rise well above 70%,the market average price level will start to declineconsumers will have a wide rangeof competing products to choose from, and will start to bargain for lower prices.Producers then need to start making attractive offers to maintain their sales volumes

A supply level of over 100%leads to much lower profit margins in the industryevendriving some producers into losses.

You should be aware of Supply Levels in all the market segments where you areoperating. As you and your competitors make investment decisions, the supply levelwill change quicklythis willaffect your ability to raise or even maintain high prices.Your competitive position is closely linked to Supply Levels for your product-markets.

Wherever possible, choose to invest in and promote businesses where Supply Levels

are relatively low, to give you a better chance of survival and higher profitability


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Market Dominance and Pricing

As you invest in new production facilities for a specific product, you will increase theSupply Level for that product, but also increase the market share available to you.

In this simulated market, investment in facilities increases the scale of your operationsand can also reward you with a larger share of the market. Other factors, such aspricing and your value proposition (quality, innovation, R&D input etc), will also havean effect on your demand and market share, but the scale of your operations is amajor factor. To grow market share then, it is important to continue to invest in newproduction facilities.

Because of the effect of scale economies, profitability is closely linked to highermarket shares, and the market will also reward you with higher pricesin effect youbecome a price leader, not a price follower.

At some point, continued investment in extra production units will increase the SupplyLevel to unsustainable levels; pricing comes under pressure, inventory builds up andsales may fall. At this point, market share is less important as losses could mount up.


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FINANCIAL MANAGEMENT

Converting Short Term Debt to Long Term Debt

Balancing short and long term financing will be important for maximising profitability.The simulation system automatically grants short term loans to your corporation,depending on your cash balances after each simulation round. If you have investedheavily, or made losses or lower than expected profits, then your short term debt willbe automatically adjusted to stabilise your balance sheet. You cannot make a specificdebt decision such as requesting a certain amount of loans. Debt levels are the resultof other decisions and the outcome of the dynamic competition.

Short term debt is more expensive than long term debt: you will have the option ofconverting short term debt to long term debt, so that your average interest charges willreduce over the next quarter

1. Review how much short term debt has been granted to your corporation

2. View the difference in interest rates between Short Term and Long Term

3. Convert the required amount of Long Term Debt to Short Term Debt by clicking

the Green + sign several times.

4. Your Balance sheet will reflect the changes you have made, and your P&L will

have reduced interest charges next period. Data is updated for the next period.

Redeeming Long Term Debt

If you have built up cash balances from positive cash flow operations, and so have notbeen granted any short term debt, you could consider paying down some of the LongTerm debt you have, to reduce interest charges


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The debt repayment decision will be based on your current financial or investment

strategy:

- If your business is experiencing strong cash flows, you should consider

using some of the cash to reduce debt and interest charges

- If you are building up cash reserves to expand your business, or to take

over another competitor (explained in a later section), or to invest in market

building activities, it will not make sense to reduce debt at this stage

- If you are expecting negative cash flows or significantly lower cash flows in

the next period because of your marketing or investment plans, it will not

make sense to pay down debt at this stage

Financing your business expansion

The financial planning panel shown below is used for a number of important functions.

1. Balancing long and short term debt will improve your companys profit

performancelong term debt is cheaper than short term: convert short term

debt at every opportunity, using the green + icon shown here

2. Share Issues:If you are planning to expand your business, you may want to

issue more shares. Depending on your cash position, debt ratio and credit

rating , you may be offered the opportunity to sell shares. A button Issue

Shares will appear at this time (see below)

3. You may also wish to repurchase shares from the marketthis may depend on

your excess cash position, and you may not feel that expansion opportunities

are attractive enough for your business plans. Excess cash deposits earn only

very small amounts ofinterest income.


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INVESTMENT DECISIONS

PRODUCT-MARKETSCheck the investment budgetthat is availableto you for this quarters operations

This is found at the top (right side) of the

My Corporation pageReview Investment optionsavailable to you in each product market.

These options will change each quarter, depending on the investment budgetavailable, the current state of the markets and supply levels

These details are found within the individual product sections of the MyCorporation page. By clicking on any photograph of any product, you will be takento a product screen, where more product and market detail is available, as shownbelow

Summary information on all products is also available under the Industry Sector tab.Click on the link SECTORMETAL to see the screen below

>>

____________________________________________________________________Overhead Costs: With each new investment, overheads will increasethese arecosts associated with managing the new production units you have started. There issome synergy effecta sharing of knowledge and systems - between differentproduct lines in the same industry, which will balance some of this cost increase.

Remember that low, current supply levels indicate greater growth potential


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___________________________________________________________________

COMPETITOR INVESTMENT ACTIVITY

Finally, to keep a check on who is investing, where and how much : at the top of yourscreen on every page you will see the NewsTicker. This will be updated at everyquarter, and shows recent investment activity by you and by your competition

If you click on any corporations name in this list, you will be able to go to see whatthat companys summary corporate information looks likeand, potentially, be able tounderstand their business strategy, their strengths and weaknesses

If you click on any product link, you will be taken to the product summary page. Thisshows which competitors are active in that sector, as well as a range of data chartswith detailed, comparative market information


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UPSIZE / DOWNSIZE/ LIQUIDATE

A further investment decision area is where you wish to reshape your product portfolioto become more competitive. Your choices are :

UPSIZEWhere you wish to expand your production capacity, to tryto grow market share. Each upsize operation is costed for you and

is available on a product-by-product basis when you have sufficientinvestment budget. Each Upsize investment indicates growth inavailable capacitytermed a 1x increase (one-ex). Upsizing :

Increases the Supply Ratio- you should evaluate marketsaturation or supply ratios for the current product market

Reduces Production Costs- the new unit can be managedwithin the current central management budgetwhich meansaverage margins will improve & overhead costs remain the same.

Average Market Pricingmay decline if Supply Level increasesbeyond 70%

An alternative approach to expansion is to Relaunch

DOWNSIZEWhen Supply Levels exceed 100%, you may be offeredthe option to downsize your productionthis mothballs one production

unit, and lays off all the employees in that unit.Supply level obviously reducesleading to a rise in average marketprices as there are fewer competitors and a relative shortage of supply

Production Costs per unit will rise as fewer operating units areabsorbing central overheads. Profit margins will depend on how farprices rise compared to the increase in costs.

LIQUIDATIONTo allow you to exit from a market. All plant andequipped is closed down, stripped out and sold off, and all employeesterminated.

If Supply levels exceed 140% - where the market is clearly saturatedyou will also be offered the option to close down.

Liquidation results in selling off any related Assets in the business unit

for 70% of Book Valuethe 30% accounting loss is written to theP&L, so your profitability, equity and share price will be hurt for thatperiod


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THE INSTRUMENT PANEL

The Instruments on the main My Corporationpage show important key ratios thatare required to manage the corporation and take investment decisions. For each ratiothe corporates current value is shown next to the ratio name and is also shown on thescale by the main indicator. The grey solid line on the scale indicates where thecorporates value was last tick. The dotted line with the little triangle indicates the

current benchmark for this ratio, based on all players values

RevenuesGrowth reflects the change of Revenues from thelast tick to the current tick. In the example shown the currentRevenues Growth (-1.17%) is below the average RevenuesGrowth of all Players and in the red (negative) range. Anegative revenues growth indicates investments in new orexisting Business Units.

The EBIT (Earnings before Interest and Taxes) Margin is ameasure for the profitability of the companies operations and iscalculated as: EBIT Margin = EBIT / Revenues. In the exampleshown the current EBIT Margin (33.25%) is slightly below the

average EBIT Margin of all Players but still in the green (good)range.

The Debt Ratioindicates how much the company relies ondebt to finance assets and is calculated as: Debt Ratio = Debt/ (Equity + Debt). In the example shown the Debt Ratio(44.55%) is well above average and in the yellow range, closeto the green. Further Investments should be made as soon asthe Indicator reaches the green range. The red range indicatesa very risky situation where high interest rates are to be paid.

EPS (Earnings Per Share) in cents.
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FINANCE AND ACCOUNTING REPORTS

Your Stock price (share price)

This is shown at the top of your main company screen

At the bottom of your main company screen are a range of detailed financial reportswhich you should trackthe basic reports are Balance Sheet, Income Statement andCash Flow. These reports are updated every period, automatically.


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Charts :

There are many charts to assist your decision-making and control procedures

For each product market, a series of business strategy helpers, eg competitiveposition, relative market shares, selling prices and contribution margins as shownbelow


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Financial Charts : for example, cost structure, total corporate contribution margins etc


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BUSINESS SCENARIO CASE STUDY

This is visible in the form of a storyline at the top of the screen and its impact on theleft hand panel of the participant screen. Participants must watch out for significantevents unfolding as part of the case study and alter their decisions accordingly, failingwhich, a less than desirable outcome may result.


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BUSINESS TERMS

Annual ReportAn official quarterly or annual financial document published by a public company,showing Profit & Loss Statement, Balance Sheet and the Cash Flow Statement.

Balance Sheet

Quantitative summary of the financial condition of a company at a specific point intime, including assets, liabilities and net worth. The first part of a balance sheet showsall the productive assets a company owns, and the second part shows all thefinancing methods (such as liabilities and shareholders equity). also called statementof condition. The term balance sheet is derived from the simple purpose of detailingwhere the money came from, and where it is now.

The balance sheet equation is fundamentally:

(where the money came from) Capital + Liabilities = Assets (where the money is now).

Hence the term double entry - for every change on one side of the balance sheet, sothere must be a corresponding change on the other side - it must always balance.

Capital InvestedMoney (borrowed or owned) invested in a company's operations. Calculated by: Total

Assets less Excess Cash minus non-interest-bearing liabilities. The sum of acorporations long-term debt, stock and retained earnings. also called invested capital.

CashCurrency and coins on hand, bank balances, and negotiable money orders andchecks.

Cash FlowA measure of a companys financial health. Equals cash receipts minus cashpayments over a given period of time; or equivalently, net profit plus amounts charged

off for depreciation, depletion, and amortization.

Cash Flow StatementOne of the three essential reporting and measurement systems for any company. TheCash Flow statement provides a third perspective alongside the Profit and Lossaccount and Balance Sheet. The Cash Flow statement shows the movement andavailability of cash through and to the business over a given period, certainly for atrading year, and often also monthly and cumulatively. The availability of cash in acompany that is necessary to meet payments to suppliers, staff and other creditors isessential for any business to survive, and so the reliable forecasting and reporting ofcash movement and availability is crucial.

Corporate Social Responsibility (CSR)Corporate Social Responsibility is a concept whereby companies integrate social andenvironmental concerns into their business operations and in their interaction withtheir stakeholders (employees, customers, shareholders, investors, localcommunities, government), on a voluntary basis.

Cost of Goods Sold (COGS)The directly attributable costs of products or services sold, (usually materials, labour,and direct production costs). Sales less COGS = gross profit.


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Credit RatingA published ranking, based on detailed financial analysis by a credit bureau, of onesfinancial history, specifically as it relates to ones ability to meet debt obligations. Thehighest rating is usually AAA, and the lowest is D. Banks use this information todecide whether to approve a credit.

Current AssetsA balance sheet item which equals the sum of cash and cash equivalents, accountsreceivable, inventory, marketable securities, prepaid expenses, and other assets thatcould be converted to cash in less than one year. A companys creditors will often beinterested in how much that company has in current assets, since these assets can beeasily liquidated in case the company goes bankrupt. In addition, current assets areimportant to most companies as a source of funds for day-to-day operations.

DebtA liability or obligation in the form of bonds, loan notes, or mortgages, owed to anotherperson or persons and required to be paid by a specified date (maturity).

Debt RatioDebt capital divided by total assets. This will tell you how much the company relies ondebt to finance assets. When calculating this ratio, it is conventional to consider bothcurrent and non-current debt and assets. In general, the lower the companys relianceon debt for asset formation, the less risky the company is since excessive debt canlead to a very heavy interest and principal repayment burden. However, when acompany chooses to forgo debt and rely largely on equity, they are also giving up thetax reduction effect of interest payments. Thus, a company will have to consider bothrisk and tax issues when deciding on an optimal debt ratio.

EBITA financial measure defined as revenues less cost of goods sold and selling, general,

and administrative expenses. In other words, operating and non-operating profitbefore the deduction of interest and income taxes.

EquityOwnership interest in a corporation in the form of common stock or preferred stock. Itis the risk-bearing part of the companys capital and contrasts with debt capital whichis usually secured and has priority over shareholders if the company becomesinsolvent and its assets are distributed.

Gross ProfitPre-tax net sales minus cost of sales. also called gross income.

Gross Profit MarginGross profit divided by sales, expressed as a percentage.

Interest CostThe fee charged by a lender to a borrower for the use of borrowed money, usuallyexpressed as an annual percentage of the principal; the rate is dependent upon thetime value of money, the credit risk of the borrower, and the inflation rate. Here,interest per year divided by principal amount, expressed as a percentage.

Also called interest rate.


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Interest RateA rate which is charged or paid for the use of money. An interest rate is oftenexpressed as an annual percentage of the principal. It is calculated by dividing theamount of interest by the amount of principal. Interest rates often change as a resultof inflation and Federal Reserve policies.For example, if a bank charges a customer $90M in a year on a credit of $1000M,

then the interest rate would be 90/1000 *100% = 9%.

Long-Term AssetsOn a balance sheet, the value of a companys property, equipment and other capitalassets expected to be useable for more than one year, minus depreciation.

Net IncomeSales minus taxes, interest, depreciation, and other expenses. Net Income is one ofthe most important measures of a companys performance, since the pursuit ofincome is the primary reason companies exist. Sometimes Net Income includes one-time and extraordinary items, and sometimes it does not.

Also called net earnings or bottom line.

Profit & Loss StatementAn official quarterly or annual financial document published by a public company,showing earnings, expenses, and net profit. also called income statement or earningsreport. The P&L typically shows sales revenues, cost of sales/cost of goods sold,generally a gross profit margin (sometimes called contribution), fixed overheads andor operating expenses, and then a profit before tax figure (PBT). Basically the P&Lshows how well the company has performed in its business activities.

Profit Before TaxP&L position that shows the profit on ordinary activities before taxation.

Return on Equity (ROE)Return on Equity. A measure of how well a company used reinvested earnings togenerate additional earnings, equal to a fiscal years Net Income divided by Equity,expressed as a percentage. It is used as a general indication of the companysefficiency; in other words, how much profit it is able to generate given the resourcesprovided by its stockholders. investors usually look for companies with returns onequity that are high and growing.

Return on Investment (ROI)A measure of a corporations profitability, equal to a fiscal years income divided byLong-Term Assets. ROI measures how effectively the firm uses its capital to generateprofit; the higher the ROI, the better.

Sales (Revenues)The final amount of sales, determined by subtracting the amount of sales returns andallowances and sales discount from the total amount of sales, for a fiscal period.


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Stock (Balance Sheet)A companys merchandise, raw materials, and finished and unfinished products whichhave not yet been sold. These are considered liquid assets, since they can beconverted into cash quite easily. There are various means of valuing these assets, butto be conservative the lowest value is usually used in financial statements.

Synergy

Arrangements which are mutually beneficial to the parties involved. Corporate synergyoccurs when corporations interact congruently. A cost synergy refers to theopportunity of a combined corporate entity to reduce or eliminate expensesassociated with running a business. Cost synergies are realized by eliminatingpositions that are viewed as duplicate within the merged entity. Examples include thehead quarters office of one of the predecessor companies, certain executives, thehuman resources department, or other employees of the predecessor companies.

TaxesTaxes are compulsory, unrequited payments, in cash or in kind, made by institutionalunits to government units; they are described as unrequited because the governmentprovides nothing in return to the individual unit making the payment, although

governments may use the funds raised in taxes to provide goods or services to otherunits, either individually or collectively, or to the community as a whole.

Total AssetsThe sum of current and long-term assets owned by a person, company, or otherentity.

Total Equity & DebtThe sum of Equity and Liabilities owned by a person, company, or other entity.

01 - Mousetrap 2012 - User Guide

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