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ENSIM:A Management Simulation Case With Environmental

Constraints

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Mission Statement

The overall mission and challenge to the participants in to run a

PROFITABLE & ENVIRONMENTALLY SOUND COMPANY

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Relationship of .....

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It is never too late ! Or is it ?

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Brief History of Human Concern for the Physical Environment

The Age of Environmental Awareness:The Romantic Sixties

The Age of Institutionalization:The Legislative Seventies

The Age of Contemplation & Analysis:The Sobering Eighties

The Age of Action:The Ecopreneuring Nineties

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Corporate Strategies to Institutionalize Environmental Concern

Addition of the environmental concern into the corporate code of ethics

Restructuring the corporate hierarchy by adding a new environmental unit

Restructuring the corporate resources allocation model

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Business Objectives & Goals

Profitability as the most important goal:Profit = Revenue - Costs +

Survival is the most important business objective

Business enterprise which consistently shows a loss is socially undesirable

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Strategies to Accomplish Goal

Growth Strategy :Focus on Revenues increase R

Efficiency Strategy:Focus on Costs decrease C

Organic Strategy:Focus on Revenues increase RFocus on Costs decrease C

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The Basics of a Wealth-Creating System

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Long-Term Goal

Increase the Entreprise’s Value

Networth =Total Assets - Total Liabilities =

Equity MAX

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A Competitive Simulation Situation Four teams of managers

operate competitive companies, trying market and production strategies, etc. The computer, furnished with a model of the complete industry and market, feeds back information to the managers and also keeps score.

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The Way to the Market

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Operating Decisionsfor each Product

Unit Sale Price The dealer’s margin Marketing effort expenditure Research and development expenditure Production volume Raw material order

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Operating Decisionsfor the Firm (1)

Expenditure to purchase competitor information

Labor relations expenditure Management training and development

expenditure Air pollution abatement expenditure Water pollution abatement expenditure Expenditure for new plant and equipment

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Operating Decisionsfor the Firm (2)

Bank loan request Bank loan payment in excess of the minimum

payment Bank notes (purchased or redeemed) Blocks of bonds offered for sale Par value of bonds bought back Dividend declaration

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Strategic Plan

Vision

Mission

Goals or Objectives WHAT?

Strategies HOW?

Justification WHY?

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Monthly Decisions Category One:

Operations and Productions Category Two:

Research and Training Category Three:

Marketing Category Four:

Investment and Finance Category Five:

Ecology

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Category One: Operations

a) Productive Capacity

b) Production Volume

c) Controlling Plant Capacity

d) Expenditure for new Plant Equipment

e) Finished Goods

f) Raw Materials

g) Raw Materials Order

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Category Two:Research and Training

a) Labor Relations

b) Labor Relations Expenditure

c) Product Research and Development (R&D)

d) R&D Expenditure

e) Managerial Efficiency

f) Expenditures for Management Training and Development

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Category Three: Marketing (1)

a) Determination of Market Demand

b) PM = f(Price, Dealer Margin, R&D, Advertisement, Economic Index)

c) Industry-Price

d) Firm-Price of Product

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Category Three: Marketing (2)

e) Dealer’s Margin

f) Dealer’s Margin for E and Marketing Expenditure for Q

g) Marketing Effort

h) Marketing Expenditure for Q and E

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Acquiring Competitor Informationa) Information in Participant’s Summary:

Price of each Product Dividend declaration Stock price Earnings per share Air and water pollution fines Days shutdown for excessive pollution Duration of any labor strike

b) Expenditure for Acquiring Competitor Information

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Category Four: Investment and Finance (1)

a) Liabilities

b) Bank Loans and Bank Notes

c) Bank Loan Requested and Excess Loan Payment

d) Bank Notes Purchased

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Category Four: Investment and Finance (2)

e) Bonds

f) Expenditure for new Plant and Equipment

g) Blocks of Bonds Offered for Sale and Par Value of Bonds Repurchased[One Block = 250 Bonds]

h) Dividend Declaration

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Category Five: Ecology

a) Pollution

b) Air Pollution

c) Expenditure for Air Pollution Abatement

d) Water Pollution

e) Expenditure for Water Pollution Abatement

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Return on Investment

Firm 1 Firm 2 Firm 3 Firm 4 Firm 5

Profit Margin 3.20% 3.20% 3.20% 3.20% 3.20%

Asset Turnover 0.21 0.21 0.21 0.21 0.21

Fin. Leverage 1.19 1.19 1.19 1.19 1.19

Return on Assets 0.68% 0.68% 0.68% 0.68% 0.68%

Ret. on Net Worth 0.81% 0.81% 0.81% 0.81% 0.81%

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Financial Ratios

Firm 1 Firm 2 Firm 3 Firm 4 Firm 5

Current Ratio 3.63 3.63 3.63 3.63 3.63

Quick Ratio 0.44 0.44 0.44 0.44 0.44

EBIT to Tot. Ass. 0.81% 0.81% 0.81% 0.81% 0.81%

Times Int. Earned 6.25 6.25 6.25 6.25 6.25

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Asset Productivity

Firm 1 Firm 2 Firm 3 Firm 4 Firm 5

Inv. Turnover Q 0.35 0.35 0.35 0.35 0.35

Inv. Turnover E 0.52 0.52 0.52 0.52 0.52

Total Inv. Trnover 0.45 0.45 0.45 0.45 0.45

Inv. Hold Period 67.63 67.63 67.63 67.63 67.63

Sales to Inv. 0.92 0.92 0.92 0.92 0.92

GMROI 0.47 0.47 0.47 0.47 0.47

Z Factor 4.77 4.77 4.77 4.77 4.77