Computer Simulation Game:

Business Policy Game Rules & Procedures

MGMT 497

Total Enterprise SimulationAn international simulation

Finance dimension

Marketing dimension

Operations dimension

HRM integrated throughout

An International Simulation

Merica, a North American country

Choice of second countryMerica – Domestic competition

Nystok – Eastern European

Pandau – Southeast Asian

Sereno – Latin American

International ConfigurationSeparate economies

Separate demand structures

Currency transfers via exchange rates

Finance DecisionsFinancial planning

Financial decisions

Financial Planning

Project expenses and revenues

Budget capital expenditures

Manage financial structure of the firm

Finance Decisions

Short-term bank loans

Bond sales & repurchases

Stock sales & repurchases

Dividend payouts

Certificate of deposit investments

Finance Decisions

Marketing Dimension

Product management

Sales office management

Product Management

Price by area

Advertising by area

Product introduction

Marketing research

Product quality

Product features

Market segments

Price & Advertising by area

Sales Office Management

Sales forecasting

Product ordering

Sales force managementHire, fire, transfer

Salary

Commission

Closing and opening offices

Salespeople Management

Production Dimension

Production scheduling

Production capacity

Resource development

Production Scheduling

Straight time

Overtime

Second shift

Production Scheduling

Production Capacity

New lines – 1 quarter to complete

New plant addition – 2 quarters

New plant – 3 quarters

Temporary layoff

Long-term deactivation

Close & sell plant

Production Capacity

Resource Development

Product development

Employee training

Production Capacity

Strategic Plan

Mission

Objectives

Strategy

Planning Support

Spreadsheet templates

Report Viewer

All reports since the competition began available

View reports on screenPrint individual reports

SimulationRun simulation

Rerun simulation

Simulation Headquarters

Management Department, ST 717

Grad assistants who run the game can be found there on decision days (Monday & Thursday) from 9 a.m. to 6 p.m.

World Numbers

Each MGMT 497 section is a separately run simulation world

Each team is a company competing against other companies in this world

Do NOT forget your world and team number for the next 10 weeks!

Company Products

Simulated world: consumer durable.

Two Year Plan and Final Reports: DO NOT need to choose a product.

Assume, for purposes of your plan, that everyone else in your world is selling the same product: your direct competitors.

Criteria Weighting Factors

Game performance is graded based on ROA, ROE, MS ($, not units), SP, UPC, TNI

Weighting factors indicate how your team prioritizes these objectives

Allows your team to influence how you will be graded

Preliminary: trial run, may be changed

Final: set in concrete; basis for grade

Quarterly Decisions

Each team submits its decision drive for each decision

Each decision is for one quarter (4 decisions per year)

The game runs for 4 years (Years 3 – 6), or 16 quarterly decisions

Geographic Home Areas

Area 1: Eastern Merica – Teams 1 and 4

Area 2: Southern Merica – Teams 2 and 5

Area 3: Western Merica – Teams 3 and 6

Area 4: Nystok/Pandau/Sereno – all teams have international sales offices; none have headquarters or plants here

GAME PROCEDURESDecision drive

Each team receives a Decision drive during the first week of classes.Each team will input their quarterly decision ONLY on the Decision drive provided by the instructor: copies will NOT be accepted.Input decisions using the Players Program available on the bpg website

Get the Players ProgramBPG website software.bpgsim.bizhttp://www.eskimo.com/~bpgGo to Players AreaSCROLL DOWN to get 6th editionDownload copy of the manual, if you wishDownload the Players Program onto your PC or laptop

User name = playerPassword = swb30oss

Install the program

BPG Game Site

BPG Tutorial

HelpContents

BPG Help• Main Menu• Decision Variables• Frequently Asked Questions• Player’s Program• Glossary

QuickStart Manual

Player’s Manual

?

Quick Start Menu

Player’s Program MenuFile

Save reports

DecisionsNew decision setOpen decision set

ReportsViewPrintGraph

Buttons for frequently used items

Materials

Player’s Program (English, Portuguese, Spanish)

Player’s Program TutorialPlayer’s Manual*Quick Start Manual

*PDF Files

Pay the Simulation Licensing Fee

On the bpg website, use a credit card to pay the $100 licensing fee for your team

Make sure you input the correct World # and Team #

• Send the license to kkwong2@calstatela.edu• Provide your own email address for

confirmation of the credit card transaction

Decision Inputs

• SetUp: make sure you set to the correct drive (e.g., a: drive, g: drive—however this is labeled for your flash drive in your computer)

• Copy decision forms from Appendix

• Help function

• Note market research is from menu

• Warning: New Decision vs. Change Decision

Decisions

• New decisions*

• Change previously entered decisions*

*Context –sensitive help

Decision Input Form

Decision Outputs

• See Appendix C for 2 year history and sample outputs

• Market research is not instant: will be printed out with your results

• Level playing field

• Industry rankings clear with each output

The Game Will Not be Rerun!!

• Get Your Inputs Correct the First Time!!

• [HINT: If you really want to FAIL Mgmt 497, change your team’s decision before turning it in.]

Print TWO Copies of Your Decision Inputs

One copy for your records.

One copy turned in in case your drive has a virus.

Decisions are Due by 1:00 P.M. Monday and Thursday

If your decision drive is not received on time, your previous quarter’s

decision will be used

Bring Your Photo ID!

• I.D. is required for turning in and picking up the decision drive: this is for your own protection!

• Pick up time: 5 p.m.

Trial Decision

Be wild and wacky. Lose millions of dollars if you wish. And be sure to

try out all the decision fields, so you know how they work.

Corporate Charter

• Turn in your company name to the simulation grad assistants

• Turn in a list of all your company executives with phone numbers with the first Game Decision—just in case!

Hope you will enjoy the Hope you will enjoy the Business Policy Game!Business Policy Game!

Some SuggestionsSome Suggestions for for

Playing the Business Game Playing the Business Game

Product PricingProduct Pricing

Remember that your company’s Market Share will be evaluated based on dollar sales, not on unit sales: Too much under-pricing is not a wise strategy to gain market share. Sales revenue data (in $000s) are given in Report F2.

Keep track of any change in operating profit margin: Monitor production costs and operating expenses closely. Account for possible general cost inflation (as indicated by CPI). Adjust production costs for different models, different features and

different quality levels when introducing a new product model (see Report E).

Note that the better the margin is, the more money the company will be able to get from every dollar of sales to invest in growth, fund strategic plans, repay debt, buy back stocks, or distribute dividends to shareholders.

Emergency Bank LoansEmergency Bank Loans

Emergency borrowing will lead to: An immediate downgrade of the company’s credit rating and thus a

sharp rise in borrowing costs.

Additional disincentive effects: Causing some salespersons to leave the company. Causing consumer demand to fall.

As with standard bank loans, emergency loans will be automatically repaid from your bank account on the first day of the following quarter. Interest is charged, at a high premium rate, during the quarter when the loan is outstanding.

R&D Funding for Product DevelopmentR&D Funding for Product Development

The payoffs from R&D spending can take time to show up: Much of the R&D spending may have little immediate payoffs, but it

improves the prospect of significant payoffs in the future.

The law of diminishing returns still apply: Beyond a certain amount, large increases in R&D funds will not lead to

any substantial reduction in time for developing a new product.

Any large cut in the R&D budget will have a negative morale effect on the R&D department, causing some of its best people to leave. Skilled researchers are hard to find and cannot easily be replaced once

they leave the company. Due to lack of funds, many existing projects can be halted. Even a new

product model which is close to release can be scrapped. The company should avoid large swings in R&D funding. Hence, steady

funding of R&D efforts is important.

Temporary Layoffs and Line DeactivationTemporary Layoffs and Line Deactivation

Increase operating expenses in the corresponding quarter Temporary Layoffs – They will result in a charge for each quarter a

production line is idle and on standby. Deactivating Lines – They will lead to a one-time charge (costing almost

twice as much as the per-quarter charge for temporary layoffs). Deactivated lines can be reactivated later but with an additional charge.

Negative morale effects on productivity Lower productivity will result in higher per-unit product costs.

Less units to spread the fixed overhead costs over The average cost per unit will rise with decreased production.

To be sure, keeping extra production lines just to avoid a higher UPC will not be good if the unsold surplus units are piling up with no quick turnaround in sight.

Introduction of a New Product ModelIntroduction of a New Product Model

Confirm the availability of a new product model. Check either the Industry Report (Report F2) and the Operating

Information Report (Report E) from the latest quarter.

Enter the new model number on the decision form for the current quarter (indicate also the quality and features levels you want for your product in each market area).

During the current quarter, your company will produce the new model but still sell the old model out of the inventory on hand. If the old inventory is depleted, some customer orders will be met using

the new model. Any unsold units of the old model will be liquidated at the end of the

current quarter.

All the inventory available next quarter will be of the new model. The new product model will officially be introduced and sold in the next quarter.

Product Model and SalesProduct Model and Sales

A new product model may not always be successful: There is at least an 80% chance that the new model will succeed and

raise sales. There is up to a 20% chance that the new model will not do well and will

actually cause a decrease in sales.

Even when two companies sell products with the same model number and same product characteristics, their products will not be perceived as identical products by consumers: This means the product brand matters for consumers. Being the first to enter a specific market or sell a new product allows a

company to acquire superior brand recognition and customer loyalty, thus giving the company some extra advantages to stay on top.

Reading the Industry ReportReading the Industry Report

When reading the Industry Report (Report F), you can see some quarterly data for all the companies in your industry. Some of the ratio numbers reported can help you evaluate the relative profitability and efficiency of the different companies.

Reported in the Report Financial Ratios

Income to Assets Ratio = Return On Asset

Income to Equity Ratio = Return on Equity

Income to Sales Ratio = Net Profit Margin

Sales to Assets Ratio = Asset Turnover

Bonds to Equity Ratio = Debt to Equity Ratio

Hope you will enjoy the Hope you will enjoy the Business Policy Game!Business Policy Game!