Finance Human

Resources

Sales BUSINESS Marketing

Operations Information
Technology
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 Industry structure

INDUSTRY 1 2 3

FIRMS (REFERENCE) 1 1 1

2 2 2

GROUPS 3 3 3

4 4 4

5 5 5

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Your tasks

• Improve the market position of the company.

• Achieve a satisfactory level of profitability.

Measure of evaluation – Balance scorecard

Four perspectives-

• Financial
• Customer
• Internal processes
• Learning and Development

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 Management Tasks

Define goals for the company

Plan strategic and operational measures

Procurement Production Sales and

Financial strategy
strategy strategy marketing strategy

Raw Material Quantities Pricing policy Long term loan

Bought in Product quality Product policy Export factoring

Stock level Machines, people Stores capacity FD with banks

Central store Production Communication Exchange rate
capacity technology policy fixing
… … … …
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 The businesses

Product-1 Product-2
ALESA BORDO

Supply to four markets – Germany (home), US, China, and India

Define your Marketing Strategies

Sell to grow your market share/ Increase profitability

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 The products

• Each company produces two consumer durable products with variants

• Alesa
• Proven product
• Main generator of revenue
• Finding it difficult to sustain customer interest
• Bordo
• Mature product
• Developed with state-of the-art technology
• Received appreciation from technical journals
• Has scope for growth as markets have partially opened

• There is no competition between Alesa & Bordo as substitutes

• They are produced on same machines but have different production times per unit
• Both products can be bought-in as finished goods, they would be equal in quality
to company’s in-house quality standards
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 The products

• Three types of raw materials

• Aurit
• Bekat
• Calot

Aurit Bekat Calot

Alesa 3 1 0
Bordo 0 2 2

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 The markets

The Markets Manufacturing unit situated in Germany

Each company competes in four global markets

• Germany; U.S.A; China; India
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 Product-market dynamics

• The markets are different in size and structure

• Alesa and Bordo have developed differently across the markets

Developed nations – Germany and U.S.A

• Alesa – introduced long time ago, reached saturation, demand could decline,
turnover could stagnate
• Bordo – customers appreciate the product, has loyal customers, turnover growth
rates could decline

Developing nations – China and India

• Alesa – is in mature stage, consumer awareness is high
• Bordo – Recently introduced, indications of higher turnover growth rates, higher
demand is expected
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 Selling in different markets?

• All companies compete in the four markets

• Presence in each market is obligatory – closing of sales branches is not
permissible

• Sales branches fulfil necessary functions such as

• processing estimates/offers and orders
• after-sales service
• customer care
• service backup
• storage and dispatch

• The size of the sales branches is fixed by expenditure on the sales

branches in one period

• Transport costs to various markets is different

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Management executives need to coordinate strategy and tactics across the following areas:

Corporate Strategy

Country-level Strategy

Marketing Company
Lean manufacturing,
Production & dividend payment, …
Procurement

Finance

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 Business objectives – marketing

• Optimal satisfaction of customer demand

• Favorable image

• High quality products

• High turnover

• High market share

• Steady growth

• Constant ability to supply goods

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 Marketing decisions

Product policy:
• Expenditure to improve the product design, characteristics
• Demand can be increased a maximum of 15%

Pricing policy:
• Deciding the price of the product to influence demand

Promotion/communication policy
• To decide on the budget for advertising and sales promotion – maximum
upto 8% of previous period’s turnover

Distribution policy
• Quantities to be transported from central store to branch stores
• Sales branches budgets across markets
• Training sales personnel – maximum 5% increase in image

Getting market information

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 Business objectives – production and procurement

• Optimal stockholding

• High degree of utilization of capacity

• Minimization of costs

• Even utilization of capacity

• Minimal staff turnover

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 Production and procurement decisions

Purchase of raw material & bought-in goods – inventory policy

• Raw material delivery takes one period and payment is made on delivery
• Raw material also can be purchased on urgent basis for delivery in the same
period at a higher cost

Scheduling production
• Quantity to be produced
• Capacity utilization – single shift/overtime/double shift

Managing personnel – HR Policy

• Appointment & dismissal of personnel
• New recruits have to undergo training hence not productive in period of
appointment
• Dismissed employees leave at the end of the period hence they are
available during period of notice
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 Production decisions

Capacity planning
• Machines ordered have delivery/installation time of one period
• Machines sold at the beginning on any period hence not available the period

Product quality
TQM
• Expenditure on TQM helps to reduce the rejection rate
• Improve the image of the company, increase up to 15% is achievable

Production technology
• Helps reduce cost of production by reducing production time
• Maximum reduction in production time per unit possible is 20%

Training of personnel
• Helps reduce staff turnover, production time, and production fixed costs

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 Business objectives – finance

• Profit maximization

• Low level of debt

• Self financing

• Distribution of high profits

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 Finance decisions

Raising and managing funds

Deciding to take long term loan or depend on short term loan (overdraft)
• Long term loan is received in period of application
• Interest rate is lower than short term loan
• Can be paid in total or in parts, redemption takes place in the following period
• Short term loan automatically paid back in the following period

Financial surplus can be invested in some instruments in the market

• It is deposited in the period of application
• Always invested for two periods

Managing Forex
• Export factoring: Accounts receivable can be collected in the same period at
forward rate with a charge (account receivable becomes zero for next period)
• Exchange rate fixing: One can decide to forward fix the exchange rate or
receive payment at the spot rate in next period
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 Company decisions

Lean Management – to help increase efficiency of the company

Reduction of throughput time of the products
• Leading to lower stocks, lower WIP
• Rapid availability to the markets
• Reduction in amount of capital tied up
• Throughput time minimum that can be achieved is 15 days (total throughput
time 23 days)
Reduction in Fixed costs
• Up to 25% reduction is possible

Payment of Dividend
• Can be paid at the end of each period
• Impacts image

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RUNNING YOUR
COMPANY

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 Things to do on periodic basis
• Review your strategy, define goals for the period (Quarter)

• Analyze reports to review company performance and industry performance

• Make tactical decisions across each functional area (aligned to strategy)

• Upload official results (STRICTLY IN TIME, ENSURE NO TYPO)

• Await results when professor processes

• Rejoice in your performance

• Begin the process again by confirming alignment of your results with your
company’s strategic goal.
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GOOD LUCK!!

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 Types of Simulations used at SPJIMR
Type Description Used at SPJIMR
Business Simulation -Cross Participants take on the CAPSTONE by Capsim,
Functional role of the top executives iBizSim By Dr. A Ullal
of a company and are BOSS by Stratx
responsible for all
functional areas of the
organisation
Functional Simulation Emphasis one functional MARKSTRAT by Stratx
area of business INDUSTRAT by Stratx
Concept Simulation Focuses on one area within Beer Game , Benihana,
a functional area Global SCM, Project
Management

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