Chains & Joints

The Case:

It may be illegal, but its still one of the worlds most profitable businesses the drug trade.
Imagine that you have just quit your job as an Operations Manager at a firm, spent sleepless
nights watching Weeds and Breaking Bad, and decided to make it big in the Drugs market.
As evident in every manufacturing and services sector, an efficient Supply Chain forms the
backbone of any industry even Drugs trafficking. Revise your concepts of Economics,
operations and trade, and get ready to set up one of the most lucrative and adventurous job
in the illegal world a drug mafia.

The only drug you believe that has a future is marijuana. Well, some countries have even
legalized it, for Gods sake. Your aim through this simulation exercise is to setup an Optimal
Production Center, choose the target market, optimize the entire supply chain and thus,
earn as much profit as possible.

Details:

Consumer markets:

1. Marijuana is partly legal in United States and Netherlands. This implies perfect
competition and low selling price. People from all over the world travel to these
locations, implying very high demand of marijuana. As such, the quality of marijuana
preferred is on the high to medium quality side. This, however, does not imply that
there will be no demand for low quality marijuana.
Risk factor: Growing international community pressure as well as the Political and
social objections domestically, may lead to a limit in the import amount of marijuana
in the future.

2. Marijuana is strictly illegal in Israel and Thailand. Thus, a high selling price is
pertinent to these countries. Stringent regulations limit the permeability in the
countries, leading to lower demands. As such, the quality of marijuana generally
preferred by the masses is on the lower side. This again does not imply that there
will be no demand for the high quality marijuana.
Risk factor: There is a chance that a part of shipment is captured by the authorities for
illegal smuggling (or a monetary penalty amount is to paid).

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Production Centers:

There are 3 production centers with variable proximity from the final consumer
destinations.

1. Mexico is closer to United States, and thus it would be preferable (but not
necessary) to produce high quality marijuana.
2. India is closer to Thailand, and thus it would be preferable (but not necessary) to
produce low quality marijuana.
3. Swaziland is nearer to both Netherlands and Israel than the remaining production
centers, and thus must cater to variable demand in quality from these two countries.

The transportation cost matrix between the production centers and the 4 countries have
been mentioned below:

Transportation Cost
United States Netherlands Israel Thailand
(In Rs.000s/kg)
Mexico 25 55 65 70
Swaziland 40 50 30 35
India 55 45 40 20

Quality:

The quality is marijuana is determined by its potency i.e. the amount of HIGH time it can
deliver. Presently, you have access to 3 types of seeds and thus production choices:

1. White Widow
Recognized as the best quality and a legend among regular smokers. The drug has the
capability to deliver a high of as long as a day. Sold largely in US and Netherlands.

2. Silver Haze
The little sister of Purple Haze found only in history books. Preferred highly among the
youth and the new-age hippies. Sold largely in Netherlands and Israel.

3. Chocolope
A cross between OG Chocolate Thai & Cannalope Haze Cannabis varieties, the drug has
taken East Asia by storm. Sold primarily in the Thai market with active relevance in
Netherlands and Israel.

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The average Demand and Price for the above qualities in the various target markets has
been identified as follows:

Demand(in kg)/
United States Netherlands Israel Thailand
Price (Rs. 000s/kg)
2500 kg 2100 kg 1100 kg 500 kg
White Widow
Rs. 170 Rs. 200 Rs. 225 Rs. 400
1500 kg 1700 kg 1600 kg 1300 kg
Silver Haze
Rs. 120 Rs. 120 Rs. 140 Rs. 130
900 kg 1300 kg 1400 kg 2900 kg
Chocolope
Rs. 75 Rs. 80 Rs. 90 Rs. 100
Note: It has been assumed that the entire supply is consumed by the market. Hence, there
shall be no need of inventory. However, the list above is an average of the last few years.
The actual prices per kg. will be decided by the demand-supply relationship assuming
perfect competition. Thus, the larger the supply of a certain product from multiple teams,
the lower will be the selling price and consequently, lower revenue.

Other information:

1. There is a limit to the maximum number of crops (read quantity in kg) that each
hectare land of the production center can produce.
Production Quantity White Widow Silver Haze Chocolope
(Max. kg/hectare) 55 80 115

2. The cost of production is the same at all the three production centers.
Cost ( Rs.000s/kg) White Widow Silver Haze Chocolope
Mexico /Swaziland /
125 96 52
India
Note: The above prices are also indicative of the past year trends. Actual cost of
production may vary depending upon the industry production trend and economies of
scale.
E.g. If more teams in Mexico produce White Widow, the cost of production will be less
than 125/kg. Similarly, in such a case, the cost of Chocolope production in Mexico will be
higher than 52/kg. Please also bear in mind that, as explained above, higher production
of a Single quality will also limit the revenue in the target country owing to high supply
and low selling prices. Thus, a diversified portfolio of all 3 types of marijuana is
recommended.
3. The IMF (International Marijuana Fund) provides loan facilities for struggling
entrepreneurs in the trade. The loan terms are as follows:
a. Up to 50,000 (in Rs.000s) 10% interest
b. More than 50,000 less than 100,000 (in Rs.000s) 15% interest
c. More than 100,000 (in Rs.000s) 18% interest
The principal and interest are to be paid at the end of the each period.

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Game Rules:

Stage 1:

The first stage will be a bidding round. Teams have to bid for the 3 production centers:
Mexico, Swaziland and India.

Rules:

1. A total bidding kitty of 200,000 (in Rs.000s) has been provided.

2. Teams must bid for all the 3 production centers, and give their preference for each
choice.
3. 100 hectares of land is available at each of the 3 production centers.
4. The minimum amount that a team has to bid on a production center is Rs. 50,000
(in Rs.000s).
5. Land price per hectare will be decided by the total selected bid for the Production
center, and land will distributed proportionally.
6. The remaining money (Total bid selected price per hectare*area of allotted land
(in hectares)) will be available to each team for Stage 2. Money for unsuccessful bids
will be returned as well.
7. In case of a tie, the land will be allotted to the team with the higher bid in their
second preference.

Stage 2:

Details will be shared after the completion of Stage 1.

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