1 esg erasmus project simventure deployment business simulation games simventure accompanying...

1eSG Erasmus ProjectSimVenture deployment

Business Simulation GamesSimVenture accompanying material

ELIOS Lab

Prof. Alessandro De GloriaELIOS Lab - Dynatech – Univ. Genoa

2eSG project

SimVenture deployment

4 main areas

Sales and marketResearch

Market Competition Customer feedback

Marketing strategy Target segment Selling points Marketing promotions

Sales strategy Pricing Sales channels Customer support

Operation

Organization

Finance

3eSG project


Research

Research is necessary to make good business decisions, in particular for a start-up

Basic, fundamental questions:How would you best describe the people who are most likely to buy your product or service?

What do you want to know from these people that will make it easier to sell your product or service to them?

How should you engage people so that you gather the information you need

Repeat this exercise if you have more than one market to aim at

Tip: don't conduct research with friends and relatives! Be objective!

4eSG project


Research

Qualitative methodsIn-depth testing of prototypes

Small numbers of testers (5-10), longer interaction

Quantitative methodsExtensive surveys (huge numbers and statistics)

Possible questions: Price; product impressions; competitors; values; buying habits;

location and access; important features; communication with the market etc.

You are wise to work with a business advisor with appropriate experience or you can buy books on the subject.

The Market Research Society's website at www.mrs.org.uk/mrindustry/index.htm provides a wealth of invaluable data and advice.

http://www.mrs.org.uk/mrindustry/index.htm

5eSG project


Research

1- Market research

2- Competition research

3- Customer feedback

6eSG project


1- Market research

It is common to consider everyone as a potential customer

But this approach fails because specific meaningful messages cannot be targeted at specific people

By doing some research and segmenting your market you can tailor promotional activities and focus on one group to sell toThis process is called MARKETING

7eSG project


Market research – key considerations

What factors can be used to identify segments?Location, buying power, product needs

Customers: social status, sex, age, interests

What is the target?What are the common characteristics? What are they looking for in a product? How many are they and where are they located? How can they be reached? What do they read/watch? How much are they prepared to pay?

How can you use this info?Identify the segments. Choose the best one to target. Make sure your product meets the specific needs (tailor your product)

How to get this info?Research agencies, but they may be too expensive for a start-up

Do it by yourself. Thinking

8eSG project


2- Competition research

If you have a good product, but your competitor has a better one…

You need to know as much as possible about your competitors to give you the best chance in the market

Avoiding strong competition will improve your chances

9eSG project


Competition research – key considerations

What do you need to know about your competitors?What are the strength and weaknesses of their products

How much do they charge

How do they market

What share of the market do they have

How to get this info?Publicly available resources

Friends

Pay a research company

How can you use this info?Find the gap in the market

Your product needs to be unique in the marketplace You must differentiate from the competitors

You need to satisfy the customers’ needs

Define your prices based on the competitors

Set sale targets

10eSG project


2- Customer feedback

You must listen your customers

Creating an effective questionnaire is not easy

Asking wrong questions

Badly interpreting the answers

11eSG project


Customer feedback – key considerations

What do you need to know from your customers?What do they think of your product? Strength and weaknesses? What would they like to change? Where did they hear about your company? What do they think of your competitors? What advertising media do they see? How often do they buy and how much do they spend?

How can you use this info?Refine your product

Improve market strategy

Plan for the future by understanding your customers’ buying patterns

Anticipate threats by competitors and exploit opportunities

Choose the right price

How to get this info?Pay a research company

Ask people to complete a questionnaire

Invite people to an event and get their feedback

Internet/phone

12eSG project


Marketing strategy

1- Target segment

2- Selling points

3- Marketing promotions

13eSG project


1- Target segment

Choose the target market for your marketing campaign

Exploit your market research data

Key considerationsWhat do customers want?Product design, selling points should follow from this

What price will they pay?

Size of the potential market?To help forecast sales and understand cash movements

How to reach them?

Competitors in the segment?It’s better to find a niche…

14eSG project


2- Selling points

To persuade people to buy your product you must communicate clearly the benefits of making the purchase

Selling points (or Unique Selling Propositions)

What candidates?Quality, performance, features, price

Delivery, methods of payment

Company experience

Choice criteria?Depends on the target audience

Exploit customer feedback

How many points?Trade-off between accuracy and effectiveness

The more you differentiate, the more you stand out from competition, but you may reduce the impact of your message (customers are more likely to read short and simple messages)

15eSG project


3- Marketing promotions

Communicate what you offer to your potential customers

Key considerationsHow much does the promotion cost?

Who will it reach?Aim at the right target

How effective is the message?Good presentation

TimelinessWhen will they have effect?

How often can it be repeatedAlso message reinforced (e.g., phone call after an

email)

16eSG project


Sales strategy

1- Pricing

2- Sales channels

3- Customer support

17eSG project


1- Pricing

Make profit and attract customers

If necessary use sale promotions and discounts

What is the lowest price you can afford?The cost of producing each unit of product

But you have also to consider the fixed costs in the business

What is the highest price your customers might pay?The higher your price, the more potential customers you exclude

What are your competitors’ prices?

How does the pricing affect the customers’ perception of your product?

Lower prices could be perceived as lower quality

Use of sale promotions?Number of sales could be more important than the profit, sometimes, for short periods

Sell off old stock, increase market share, counter a competitor’s promotion

18eSG project


2- Sales channels

Choose the best way to get your product out into the market

How much does it cost?Set-up (overhead) and implementation (cost of sale)

Time and effort needed?

How much of the selling price will you get?Consider also possible cost reductions or revenue increase

What channels do your potential customers normally use?

What channels are open to you?A major distributor will consider only referenced products

Shop retail works with the right premises

19eSG project


3- Customer support

If you want to retain your customers and avoid bad reputation..

Key considerationsWhat type of support do they needInstallation, failuers

When is help needed and for how long?

Can you charge extra?Adding value like this is a common practice

Reputation will suffer if you say that support is a selling point and it does not work well

Can you help customers to help themselves?Forums, knolwedge databases, good documentation

20eSG project


Area 2 - Operations

Product design

Purchasing

Production

Quality

21eSG project


Product design

Give customers what they want

Choose the right mix of product attributes whilst keeping costs down

What do your customers want?Market research

How long does it take to design?You need to predict where your business will be when the design is complete

How much does it cost?Giving customers what they want makes no sense if the production costs make a loss

What else will be affected by a redesignImpact on sales, marketing, support and packaging

Other issuesHow often redesign?

22eSG project


Purchasing

Find the right supplier

How much do you have to pay?

Payment termsE.g., credit terms (avoid paying before you are paid by the customer)

Good relationships

Reliability: right goods, time, quality

Discount for bulk buying

23eSG project


Production

How to produce

How much stock to keep?Less delay in availability

Ties up vital cash that might be needed elsewhere

How many to produce?Batch production

Efficiency + May not fit your orders - Keep stock - Bulk buying +

Who produces?Outsourcing?

Make on your own may make it easier to satisfy orders promptly

24eSG project


Quality

Monitor your products’ reliability to attain a high level of quality

Check your product/service to identify defects before supplying to the customer

Prevent faulty products going out the door Bad reputation

Highlight problems in the production process which causes such failures

How is it done?Random testing

Check a proportion

Inspection Visual check for obvious damages

Soak testing Extensive time for every product

25eSG project


Area 3 - Organization

Create a stable platform for your business to flourish

Typically, long-term decisionsWeigh up your options carefully

For a small business, staying flexible is often the most important principle

3 sub-areasPremises

People

Legal

26eSG project


Premises

Get the best mix of space, location, facilities and value

Equip with the resources

Choose the services you need

27eSG project


1- Location

Try to ensure your premises project an image that is consistent with your product

Spaces:Storage, receprion, rest areas, services

Where:A good location may expose you to many more potential customers, portray a stronger image

Too far places may deter them

What terms?Lease is good to spare cash, but you may have limitations in extension and use

Facilities included in the priceA lot of services needed for a start-up (e.g., receptionist, photocopiers, etc.)

Managed premises may provide these for a fixed cost

Effects of relocation?

28eSG project


2- Resources

What?Equipment

Furniture

Transport

Tools

What effect on your business?

How to pay?Equipment can be hired

Vehicles can be paid for over a period of timeThis costs you more, in the long-term

29eSG project


People

1- Business owner40 hours usally. But a business owner may take much more (80)

What are the risks of working too hard?StressDemotivationLess effectivenessIll healthFamily/social life affected

Be conservative: assume you need more than less

Make sure you achieve your earning target

30eSG project


Training

How much does it cost?Usually, the more you pay, the quicker you learn (not always true)

How long does it take?Make decisions that meet the needs of your business

How much time will be lost?DVD-Course, vs. real teacher

How many people need the training?

Where and when?Near your premises is more effective

31eSG project


Recruitment

How to find perspective candidates?Own advertising vs. agency advertising

Who do you interview?An agency may filter better through CV scouting (not everything in a CV is as it seems)

InterviewSkills, background, aspirations and personality

Check the CV

Sell them the job, giving info and answering questions

What can you offer them?Not only money

Career path, training in new skills, flexible hours, autonomy

32eSG project


Management

Allocate responsibilities to your staff

Primary, secondary, reserve, never

Tasks:Design, recruitment, training, finance, sales, marketing, etc.

Staff skills:Production, writing, research, business mgmt, marketing, sales, etc.

33eSG project


Legal

Set up a Limited CompanyYou can start without, but you’ll need quite soon

Health & safetyUndertake a risk assessment of your premises

Check all H&S issues are considered

Contract lawTo provide to customers

Also to protect you

Employment lawPay, disipline, hours of work, maternity,time off-work etc.

Use a professional to have advice and guidance

34eSG project


Finance

Raising money

Banking

Forecasting

Accounting

Credit Control

35eSG project


Raising money

Bank loansDecision parametersAmountPeriodInterests

Can you offer security?The process of arranging the loan will be much smoother…

What flexibility do you need?Close earlier, take a payment holiday…

How much do you need?Borrow enough at the start…

How long do you need?The longer you take to pay back the loan, the more interests you will pay

36eSG project


Raising money

Friends and familyThe same parameters as for a bank

Do you all understand the risk?

37eSG project


Raising money

Bank overdraftAimed for you to handle short-term borrowing needs (while loans are more for long-term)

A business-plan needs to be presented with a realistic forecast of future sales, costs, thus profits

An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero. In this situation the account is said to be "overdrawn". If there is a prior agreement with the account provider for an overdraft, and the amount overdrawn is within the authorized overdraft limit, then interest is normally charged at the agreed rate. If the negative balance exceeds the agreed terms, additional fees may be charged.

38eSG project


Raising money

Selling equity (shares)

What is the company worth?

How much are you willing to give away?Some investors want to be involved in the running of the business

They may bring vital skills you don’t have

Investors are here to make moneyWhat do you offer them?

How to find investors?Networks of business angels are specialized in very small businesses

39eSG project


Raising money

Grants

Many companies are not aware of the aid that is available to help them get off the ground…

QualificationsTypically: new businesses, the young, disadvantaged areas

Who offers grants?Government agencies, charitable organizations

What can they be used for?Normally they are specificaklly purposed: training, R&D

Application process can be lengthy and with no guarantee of success

40eSG project


Banking

Set up a bank accountWhy needed?

To pay and get paid

Earn interests (vs. inflation)

To get an overdraft – short-term borrowing – or loans

CostsFixed or variable

41eSG project


Forecasting

Predict future activity in order to anticipate problems before they occur

It’s better to make a series of educated guesses

Sales targetsEstimate future sales, based on research

BudgetsEstimate costs for different areas of your business

Profit forecastTotal sales for the predicted period minus production and fixed costs

Cashflow forecastSimilar to profit/loss, but calculations are based on when money changes hands

42eSG project


Forecasting

Predict future activity in order to anticipate problems before they occur

It’s better to make a series of educated guesses

Sales targetsEstimate future sales, based on research

BudgetsEstimate costs for different areas of your business

Profit forecastTotal sales for the predicted period minus production and fixed costs

Cashflow forecastSimilar to profit/loss, but calculations are based on when money changes hands

43eSG project


Sales targets

Necessary to generate a profit or cashflow forecast

You can anticipate problems and correct them before they become critical

Not easy.. The more established you are, the easier it becomes, as you can exploit historical data

Without them, you can use research and marketing/sales strategies. Better to be conservative…

Review the targets against actual results, in order to update the forecasts and see whether you need to change the sales activity

44eSG project


Budgets

Estimate your future spending in the main categories of expenditure over forthcoming months

It is wise to add a little bit of contingency to each expenditure category for unforeseen expenditures

Necessary for financial forecasts (profitability and cashflow) and to check if you are spending too much

Fixed and variable costs (depending on production)

Frequent checks. If you spend too much, try and reduce your spending or update the prediction figures

45eSG project


Profit & Loss forecast

Compare predictions for income and expenditure (diffeerent categories of costs) over a period of several months

It is not concerned when the payment is made, only when the cost was incurred

Profitability is needed for a business to survive. You cannot make continual losses

If the forecast profit is low, you need to improve the situation

Remember that profitability is meaningful only over the long-term. So, watch the trend over 6 months to 1 year

46eSG project


Cashflow forecast

Perhaps the biggest problem that faces a small business

You may be well in profit and still fail because you run out of your most precious resource: money

A monthly estimate of how money will enter and leave your bank account

Prediction is a vital exercise that needs to be done regularly

You should avoid below 0 (or agreed overdraft limit). Check when you can make bonuses or investments

47eSG project


Accounts

BookkeepingRecord your business transactions to provide the raw data for accounts

“Double entry” “Partita doppia” because each payment is entered twice, once for the category and once for the account affected

48eSG project


Accounts

Profit & loss reportReview the profit made by the company to determine how successful it is

When the money changes hands is not considered

If a sale is agreed or a cost incurred in that month, it is duly reported

Some things do not affect profitLoans or equity inputs to the business

Repayments on loans (except interest)

Only affect balance sheet and cashflow

Compare the profit report with the profit forecast and adjust forecasts accordingly

49eSG project


Accounts

CashflowMovement of cash in and out of your businessWhen money changes hands, rather than when the cost is

incurredThis becomes an issue when custmers pay an account

(payment after 7-30-60-90 days)

When you run out of money, the company cannot operate and you will be out of business

This is why forecasting is essential

What can you learn from the cashflow report?The effect of late payers, how much you might need to borrow, seasonal variations, causes of big cashflow swing

50eSG project


Accounts

Balance sheetMeasure the value of the company’s tangible assets and liabilities (attivo e passivo)

It takes no account of intangible assets like brands and future earnings

Amount owed to creditors

Value of asssets can be used by lenders and investors before putting money into the business

The final figure does not represent the worth (market value) of a company – this would involve also potential future performance

51eSG project


Accounts

Balance sheetCombination of long term and short term assets

Fixed assetsEquipment. Take the purchase price and depreciate them among each year

Current assetsTotal money owed to the business (debtors), cash in the bank, value of stock on hand

Current liabilitiesAnything outstanding to your suppliers (creditors)

Long-term liabilitiesValue of any loans outstanding

52eSG project


Other financial measurements

Assess the health of your business in a variety of ways

Return on Capital employedCurrent assets (cash, debtors, stock) / current liabilities (creditors, overdrafts)

Liquidity of a company. Should be around 1.5. Below 1 is in danger

Current ratioNet profit / capital employed x 100%

Profitability: should be higher than savings accounts

GearingLong term loans / capital employed x 100%

A measure of risk for an investor

Asset turnoverSales turnover / net assets

Volume di affari. A measure of how well the company’s assets are being used to generate sales

53eSG project


Credit control

Monitor customers who owe money and adopt a strategy for late payment

Is your debtor even aware of being late?

Being understanding (of your debtor needs) might be a good choice

Start slowly and politely, and gradually ramp up the pressure

Is the payment worth chasing?A company that has no money is unlikely to pay you

Possible choices?Mail, phone call, threaten legal action, debt collection agency

1 esg erasmus project simventure deployment business simulation games simventure accompanying...

Documents

competition research

research agencies

marketing slide

dont conduct research

customer feedback slide

genoa slide

good product

product needs customers