EuroNet: Business Simulation

Karen Valverde Cranfield Business Simulations

Centre for Customised Executive Development Cranfield School of Management

Tel +44 (0)1234 754427 Email: k.l.valverde@cranfield.ac.uk

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Table of Contents An Introduction to EuroNeT ...................................................................................2 MARKETING ........................................................................................................3

Retail Market Fabrics, Fittings and Furniture..........................................................3 Retail Price ....................................................................................................3

Company Image ...............................................................................................3 Advertising ....................................................................................................3 Environmental Issues......................................................................................3

Positioning .......................................................................................................3 Marketing Information .......................................................................................4 Wholesale Market..............................................................................................4 Margins ...........................................................................................................4

DISTRIBUTION ....................................................................................................5

Retail Sales ......................................................................................................5 Retail Outlets....................................................................................................5

Location ........................................................................................................5 Retail Outlets Capacity ....................................................................................5

Customer Service..............................................................................................5 Product Promotion.............................................................................................6 Human Resources .............................................................................................6 Transport.........................................................................................................6

Emergency Hire..............................................................................................6 OPERATIONS.......................................................................................................7

Raw Materials ...................................................................................................7 Bought-in Finished Goods ................................................................................7

Machines – manufacturing facility ........................................................................7 Investment in New Production Capacity .............................................................7 Sale of Production Capacity..............................................................................8

Production Process ............................................................................................8 Quality of Production .........................................................................................8

Hi-Tech Automation Technology........................................................................8 FINANCIAL CONTROL ...........................................................................................9

Financial Reports...............................................................................................9 BALANCE SHEET.............................................................................................9 PROFIT AND LOSS ACCOUNT .........................................................................10

Bank Loans ....................................................................................................12 Environmental Issues....................................................................................12 Payment of Tax............................................................................................12 Cash Flow....................................................................................................13

Reports ............................................................................................................14

The Management Report................................................................................14 Financial Report ...........................................................................................14 The Journal .................................................................................................15

Quick Reference Guide ........................................................................................16

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An Introduction to EuroNeT

This simulation has been designed to illustrate the relationships between the different functions of a business, e.g. manufacturing, procurement, marketing, distribution, retailing, finance, and the interfaces in a competitive market place. The simulation does not attempt to reproduce all the conditions that may be met in a real-life situation. To do so would result in a model too complex to be of any immediate value, but the simulation is sufficiently realistic to emphasise the need for the integration of diverse company functions. You are managing a vertically integrated company, operating in a European market, which manufactures a range of related products and sells direct to the public through its own retail outlets, in competition with several other competitive companies. You also trade from time to time through wholesalers to external markets. As a Top Management Team you take a series of decisions to improve the profitability of your company. All decisions are interactive, in that the decisions of any one team will impact on the whole market place and on the performance of competitors. Decisions will have both short term operational and long term strategic dimensions. The ultimate success of your company will be a reflection of the quality of your management of the different functions of the business, and your judgement of the competitive market-place. You are going to take your first set of decisions at the beginning of the 5th quarter (Quarter 5), after having had the opportunity to analyse the data for the first year (1st to 4th quarters). The previous year of trading is the basis from which you start. All companies start from the same data base and with equal resources AND equal shares of the total market. The details of market demand and sales (in units) at the end of the first year can be found both in the Management Report and in the Marketing area on the system.

Karen Valverde

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Company and Market information

All information and decisions fall, broadly speaking, into four functional areas – Marketing, Distribution, Operations and Finance. MARKETING

Retail Market Fabrics, Fittings and Furniture Here you can view:

Market share, Competitor pricing, quantity and value of sales Total market demand and sales

Retail Price

The selling price per unit must be decided for each of the 3 products. These must be in whole numbers. Goods cannot be sold below the cost of production. The upper limit will be determined by market forces. In no quarter can a price be more than 250% higher than in the previous quarter.

Company Image Advertising The amount spent on store publicity will impact on your company image. The effect of investment is immediate and cumulative. Environmental Issues Your active concern in these important issues may be demonstrated by investment in anti-pollution and conservation programmes. Company Image will improve with a positive impact on your attraction index.

Positioning You are competing in both the Retail and Wholesale markets, but these markets are completely separate and the reasons why your customers buy are different In the Wholesale Market, Price, Product Quality and Payment Terms are

important. In the Retail Market, Competitiveness and Attraction are important.

Your Market Share is affected by Price, Product Promotion, Product Quality, and your ability to attract customers into your retail outlets. The mix of these factors form the Competitive Index of which the Attraction Index is a part.

Attraction Index is your company’s ability to attract customers into your outlet(s). It is a reflection of the number and location of outlets (the total number of sites, especially of central sites, enhances your capacity to attract customers), the advertising of your company (which increases the company image), the quality of your services (which puts the customer at ease and builds customer loyalty), your investment in environmental issues (which increases your appeal to the customers sensitive to ecological concerns), and your previous market share (which is the reflection of your gained reputation).

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Marketing Information Economic trend and forecasts. The economic indicator compares the trading quarter of the present market conditions to Q1 which is equal to 1. If the economic indicator is above 1, the market situation (the basis for market demand) is seen to be better than Q1.

Wholesale Market The Wholesale market is completely separate from the Retail market and success criteria are different. Each quarter the wholesale market establishes quantities, minimum relative quality acceptable and maximum price considered. You have the option to enter the Wholesale market or not. If you choose to enter, you must indicate: The maximum no. of units you are prepared to supply in each product

category. You may offer less than the full amount required but you cannot offer more than the amount required.

The relevant prices: The price must be equal to or lower than that stated

by wholesaler. Price cannot be varied by more than 20% of your previous stated price.

The quality must be equal to or higher than that stated by wholesaler.

The payment terms, the number of months credit you are prepared to

offer the wholesaler, 0 - 3 months. Your success in the wholesale market reflects price, product quality, and the terms of payment. There are no transport charges involved, the wholesaler is responsible for collecting from the point of manufacture. The wholesale market is supplied from current production. It cannot be supplied from stock from earlier production runs nor can bought-in stock be sold on to the wholesale market. Goods for the wholesale market have priority over retail sales and are taken from production before retail market.

Margins The profit margins represented here are: revenues less cost of products sold (including cost of production, cost of raw materials, cost of machines based on their usage = Gross Margin) and then less commercial costs (including outlets, salaries, promotions, customer service and advertising).

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DISTRIBUTION

Retail Sales The goods available for retail sales is given by the stock at the end of the previous quarter plus the production of the current quarter minus the quantity sold to the wholesale market. You can never sell more than the 90% of the goods available for retail sales, because you are obliged to keep a 10% stock-holding of each product. “First Choice Sales” are your actual retail sales and are the market response to your decisions. Second choice (additional) sales are orders which a competitor has not been able to satisfy and you have benefited. You will gain these only if you have goods available and your competitive index is above average.

Retail Outlets Location

You have retail outlets located in city centres (central outlets) and in suburban shopping malls (out-of-town outlets). The level of sales is influenced by the number of retail outlets, and their location. Generally, the more outlets the greater your potential to increase sales. Presently, you have 5 central and 7 out-of-town outlets. There is a charge per period for Rent and Council Tax for each outlet. For Q1 2006, the charge for central sites is €425,000 per year. For out-of-town sites the charge is €225,000. These charges appear in the P&L Account on the Finance Report and may vary from quarter to quarter. See The Journal. You may change the number and location of your outlets by investment or disinvestment. Newly acquired outlets come into service immediately. There is a penalty clause if you do not wish to renew the rental of an outlet, this being equal to a quarter’s rental. (Put in a negative figure if you do not wish to renew!) Retail Outlets Capacity

Your company sales are limited by the total volume that your outlets can handle in a quarter. Each quarter, an outlet can handle a limited quantity of goods, measured in space units. Also, the different products have different space requirements:

Item Space Units fittings 1 fabrics 5 furniture 10 central outlet 40,000 out-of-town outlet 55,000

Customer Service Investments to improve the level of customer service in your retail outlets e.g. more check-outs/creche/baby changing-rooms/restaurants/parking etc. These

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investments will increase the attractiveness of your outlet(s). See Attraction Index

Product Promotion The amount you decide to spend on promotional activities for each product in the quarter. There is an immediate and cumulative effect of all expenditures. Relationship to market size and market share is not directly proportional. If you are unable to meet your orders, they may be offered to

competitors.

Human Resources Employees in your retail outlets fall into 2 categories: Salespersons and Supervisory Staff. See The Journal for Salaries Your capacity to sell goods is not only related to the number and location of your outlets, but also to the number of your supervisory staff and sales people. Their skill level is a reflection of your training budget and the support by your customer services. Investment in training will improve their effectiveness leading indirectly to increased sales and profitability. Your initial supervisory staff is 104 people and they are managing 400 sales people,

The number you employ in each category can be increased or decreased: A positive figure = increasing by hiring A negative figure = reduction in levels

(which cannot exceed 10% of current levels in any one quarter). To increase effectiveness you can employ more people, or train, or both.

Transport Finished goods cannot be stored at the factory so you are required to have sufficient transport each quarter to deliver your products to your central warehouse. You are not required to provide transport for goods supplied to the wholesale market. The wholesaler is responsible for collecting from the point of manufacture and will incur all transport costs.

Each vehicle has a capacity of 30,000 space units. Vehicles may be bought at a cost of €80,000. Vehicles become available in the quarter following purchase. Depreciation is at a rate of 1/12 per quarter on the original value. There is no resale market for vehicles.

There is a fixed charge of €0.3 per space unit for all goods delivered to the central warehouse. The different products have different space requirements; fittings take up 1 space unit, fabrics 5 space units and furniture 10 space units. Any combination of products is possible in the same vehicle. Emergency Hire

Where you have insufficient transport to immediately move the products to your central warehouse, an external supply of transport is automatically engaged at a hiring cost of €0.75 per space unit.

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OPERATIONS

Your company has an established and flexible manufacturing capacity capable of producing all products, which can be supplemented by purchases of finished products from external suppliers.

Raw Materials Raw materials for each product may be procured from local suppliers or from importers.

Local supplies are available immediately. Imported supplies are available at one month delay.

Imported supplies are of lower and variable quality, but cost less. Due to the one month delay only 2/3 of the total ordered is available for the current quarter, the remainder will arrive next quarter.

The quantity available for use next quarter is shown on the Management Report and in the Operations area on your system, as End Stock + deliveries pending (which is the remaining 1/3 of raw materials purchased in previous quarter).

The stock of raw materials is evaluated on a LIFO basis.

Raw materials do not incur warehouse costs.

The decision entered must be rounded to the nearest hundred.

Bought-in Finished Goods

Bought-in finished goods are variable in quality. Their quality, the price at which they may be bought, and any discounts for volume purchases are shown in The Journal for the quarter. The decision taken must be rounded to the nearest hundred.

Machines – manufacturing facility Your overall manufacturing capacity is measured in production hours. The different products require different amounts of production time, which can be modified by investments in Hi-Tech Automation Technology. Investment in New Production Capacity

Manufacturing capacity can be bought or leased. If buying, a new machine with a capacity of 1500 production hours in the first quarter will cost €250,000. New machines do not become available until the quarter after purchase. Your manufacturing capacity will continually depreciate due to the ageing of machines. The life of each machine is 3 years and will therefore, each decision quarter, depreciate by 1/12 of the starting capacity in both effectiveness and value. If leasing, a similar machine will cost €25,000 per quarter for a fixed contract of four quarters (1 year). Leased machines may be used immediately and reduces by 1/12 each quarter in terms of production capacity based on original values.

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Sale of Production Capacity If it becomes necessary or desirable to sell owned machines in order to reduce production capacity, machines can be sold at 50% of current depreciated value, not exceeding the capacity of owned machines. Oldest machines are sold first. Machines go out of use immediately. The system will not show an immediate reduction in hours, you will need to calculate this yourself. To reduce the number of machines, type a negative figure. Cash realised from the sale of plant is not received until the beginning of the quarter following sale. When machines have ended their 3-year-life they are no longer available for use (it is not necessary to put a negative figure!) Note: The table listing the ageing of your machines in Operations – Machines, is

historical information, it does not represent the present quarter.

Production Process The number of finished goods to be produced and/or purchased from

external suppliers has to be decided. The production hours required to make the products differ with each

product category. The production hours required reduce as a consequence of your

investment in hi-tech automation technology.

See under Hi-Tech Automation Technology. Production levels are constrained by raw material supplies and the maximum number of hours of production capacity available. The maximum capacity is shown in the Management Report under Machines (and, of course, in the Operations Office). The cost of production includes labour and is equal for all companies. The cost of production increases by an inflation rate of 1% per quarter.

Quality of Production Hi-Tech Automation Technology The quality of the products is affected by the investment in Hi-Tech Automation Technology. Investment in AT will raise the overall quality of your products. The benefits are as follows The quality of your product is enhanced. The production hours required is reduced, thereby increasing your

production capacity. The effect of investment is immediate and cumulative.

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FINANCIAL CONTROL

Financial Reports There are two Financial Reports The Balance Sheet The Profit and Loss Account

In addition, there are some key ratios and the current borrowing limit.

BALANCE SHEET

ASSETS:

Net Machines Value The value of plant in the Balance Sheet shows the depreciated value.

Vehicles Net Value Same as per the machinery

Stock of Finished Goods and Raw Materials The value of the various categories of stock shown in the report.

Accounts receivable The total amount of outstanding money from the wholesale market from

deferred payment terms and also a third of retail revenues of the quarter.

Cash LIABILITIES:

Share Capital This figure remains unaltered throughout.

Loans The figure of loans outstanding includes all previous loans plus the loans

applied for in the current quarter minus any loans repaid.

Creditors (Accounts payable) The amount of outstanding bills you will have to pay during the next

quarter.

Provision for Tax The accumulated provision since the last tax payment. Tax payments are

made at the beginning of each year from cash.

Cumulative Profit The accumulated net profit (retained earnings Your PC shows P&L A/c per quarter; the Financial Report shows it cumulative for the year (4 quarters).

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PROFIT AND LOSS ACCOUNT This is the complete record of income and expenditure. It will show: The total sales revenue from sales in both retail and wholesale markets

Unit sales x price

NB: Goods cannot be sold below the cost of production. In no quarter can a price be more than 250% higher than in the previous quarter.

Any investment income Interest earned on surplus cash

Change in value of finished goods in stock

Change in value of raw material stocks

{Stocks are valued by LIFO - last-in one quarter is first-out next quarter

Cost of Production The production costs of all products made in the quarter.

The cost of production increases by an inflation rate of 1% per quarter.

Units x Production Cost/unit

Raw Materials Cost The total expenditure in the quarter in purchasing raw materials

Quantity x Price for local supplies

Quantity x Price for imports

Bought-in Total cost of all bought-in Finished Goods

Fixed Costs Includes the quarter cost of all support services, maintenance of building and equipment etc. Fixed costs are calculated as a fixed value of €250,000 plus €15,000 per operative machines.

Depreciation on machines Depreciation is at the rate of 1/12 per quarter of the original cost of each production unit you own, starting with the quarter following purchase.

Leased machines Expenditure on leased machines for the quarter.

Depreciation on vehicles Depreciation is 1/12 per quarter of the original value starting with the quarter following purchase.

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Transport Costs The total running costs in the quarter for the

transportation of goods to your central warehouse.

All goods produced in your own factories, other than those destined for the wholesale market, have to be transported immediately to a central warehouse adjacent to your retail outlets. There is no facility for storage of finished goods at the factory. If your own transport capability is inadequate, outside contractors are automatically brought in. The full costs of transportation are:

Using own vehicles = No. of transported space units x 0.3 cost/unit

Hired transport – no. of transported space units x 0.75 cost/unit

Warehousing Costs There is a fixed cost of €300,000 + €2 per space unit for stock held at the end of the quarter.

Loss on Sale of Plant The loss sustained when production capacity is sold-off at 50% of current value. Machines sold in the quarter of sale depreciate. The oldest machines are sold first.

Cost of Retail Outlets The total rent and taxes payable for the quarter for all retail stores, both central and suburban.

There is a penalty equal to one quarters rental if you do not wish to renew the lease of an outlet.

For Rental Charges see Journal

Salary Costs Total costs of all staff and sales persons employed during the quarter. For the Salary Levels see Journal

Interest Payable Interest payable on outstanding loans during quarter.

Other Expenditure The total of your validated expenditure

amounts for the quarter for:

Hi-tech A.T

Environmental

Promotions

Advertising

Customer Service

Staff Training

Profit before Tax Total Income - Total Expenditure

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Bank Loans Each company will have cash and the ability to borrow from the bank.

The amount which the bank will be prepared to lend reflects their assessment of your performance and is in effect a credit rating.

Money borrowed will be charged at 2% interest per quarter.

Preferential borrowing rates apply to companies committed to so called "Green Issues" - see Environmental Issues.

The Bank establishes a maximum level of permitted borrowing each quarter (= Credit Rating).

Money, at prevailing rates of interest, may be borrowed up to this level but not beyond.

The level of permitted borrowing reflects your performance and increases

with rising profitability.

Loans may be repaid at anytime.

Entering a +ve figure = a new loan requested

Entering a -ve figure = repayment New loans taken out and loan repayments take effect as cash transfers at the end of the quarter. Environmental Issues

Your active concern in these important issues may be demonstrated by investment in anti-pollution and conservation programmes. The Government is encouraging banks to lower their interest charges to companies demonstrating higher than average commitment to such programmes. For these companies normal bank interest charges for the quarter will be reduced by 0.2% for each €100,000 invested up to a maximum of €500,000 in any one quarter (the maximum reduction is 1% per quarter). Bank interests are charged on previous borrowings; the reduction for environmental investments is seen in the quarter that the investment has been made. Company image will improve with a positive impact on your Attraction Index. Payment of Tax

There is corporation tax of 50% on all profits made in the quarter. Tax has to be paid annually at the beginning of each year and is automatically deducted from cash reserves.

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Cash Flow

Your total cash position is the cash shown in the latest Balance Sheet plus Debtors. This may be supplemented by new loans and any cash received from sale of machines. It is crucial to have a tight control on the cash available in the quarter and on the future trend of company cash flows. The risk you run if you do not take control is to suffer an automatic reduction for your decisions in the quarter. To help you understand better how cash flow is calculated please observe the following terms of payment for expenditure and investment. Payments made in the quarter: Payments due in the following

quarter: Production costs Raw materials (amount delivered in the quarter) Leased machines Salaries Rent Vehicles Promotions

Automation Technology Purchase of new machines Bought-in finished goods Customer service Advertising Environmental expenditures Training costs

The cash available is a consequence of:

+ Cash (from the end of the previous quarter in the balance sheet)

- Tax payment (due at the beginning of the year)

- Payment in the quarter for existing units and employees (rent of outlets, leased rate, salaries)

+ Disinvestments in the quarter (reduction in number of employees).

+ New loans

- Loans repaid. Notes:

Cash realised from the sale of plant is not received until the beginning of the quarter following sale.

If at any time cash needed exceeds the existing availability of cash then the system will reduce proportionally every expenditure and investment made.

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Reports

Competitive advantage is the aggregate of many factors. Many of these, e.g. quality of production, level of advertising, environment factor quality, level of promotion (per product), quality of customer service, are expressed as relative values in percentage terms, based on the following assessment:

Amount of your investment in current quarter compared with average of all competitors.

Your cumulative investment to date compared with the average cumulative investment by all competitors.

Competitive advantage depends also on the number of retail outlets, their location, and the effectiveness of the supervisory staff and salespersons, together, of course with the quality of management overall.

The Management Report

Your decisions together with your competitor’s decisions will be processed and a report of your performance updated. This report will provide information in the following areas: 1. Total market statistics for the quarter showing demand, sales, prices,

market shares, expenditures on technology, environmental issues, promotions, advertising and customer service, and average market quality levels.

2. Details of your company performance in terms of sales, revenues and competitive position in terms of production quality, environmental issues, advertising and customer service.

3. Details of your own current production, your transport capacity, stock of finished goods, raw materials stock and deliveries pending.

The quality of end stock shown on this report represents the average quality of the total available goods to the retail market in the quarter. These goods are of varying qualities and are a mix of beginning stock, present production less any sales to wholesale and bought-in finished goods, if purchased.

4. Details of your retailing outlets, your supervisory staff and sales people, and their level of effectiveness.

Financial Report

Financial performance in the form of a Profit and Loss Account and Balance Sheet, together with key ratios and your borrowing limit.

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The Journal

Refer to the Journal for quarterly updates on: The cost of raw materials which you could buy, both locally and imported.

The cost and the quality of the finished goods you could buy on the local market; any quantity discount terms and the threshold above which such a discount applies.

Production costs for each product.

The quantity that the wholesale market requires at the minimum quality and maximum price acceptable.

The rent and council tax payable on central and out-of-town outlets.

The annual salary level for supervisory staff and sales persons.

The economic indicators: 1.0 is stable < 1.0 = Recession > 1.0 is a buoyant economy.

Total number of retail outlets in the market.

Market research which indicates the sensitivity of your retail customers to several competitive factors.

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Quick Reference Guide

Karen Valverde Cranfield Business Simulations

Centre for Customised Executive Development Cranfield School of Management

Tel +44 (0)1234 754427 Email: k.l.valverde@cranfield.ac.uk

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An overview of EuroNet You and your team are acting as the Top Management Team of a vertically integrated business operating in a European market worth 50 million euros. Selling a range of products direct to the public through your retail outlets and to wholesale – 2 types of customers and the reasons why they buy vary. You sell a range of products – Fabrics, Fittings and Furniture all related but independent of each other. You have your own manufacturing facility, so you can make the products yourself or approach an external supplier (BUY-IN) to purchase finished products. BUY-IN considerations:

Cost per product – determined by the supplier Quality – determined by the supplier Quantity

MAKE considerations:

Supply of raw materials - Source locally or import or both Cost per unit of raw material- determined by supplier Quality – determined by supplier Delivery Quantity

Production Process – opportunity to improve efficiencies and improve quality of finished products through investments in Automation Technology. Production volumes

If you BUY-IN, you can only sell through Retail. If you MAKE, you can sell Wholesale and Retail. Wholesale will only buy from a fresh production run and will be supplied first i.e. before the retail market. Competing companies are asked to submit a bid if they wish to sell to the WHOLESALE market. The wholesaler will inform the market of its required quantity and will buy on the basis of PRICE, QUALITY and TERMS OF PAYMENT only. Selling through retail – determined by your ability to attract customers through: Outlets Employees Product Promotions Customer Service Retail customers will buy on the basis of: Perceived Price = Price + product promotional activity Quality Attraction

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All competing teams start with exactly the same resources, both physical and financial, with exactly the same market shares. All companies are competing for competitive advantage at several interfaces e.g.: Sourcing Raw Materials MAKE, BUY-IN or BOTH Quality Location Pricing/promotions Customer Service Environmental Advertising The simulation is an interactive one, that is to say, any decisions that one company take will not only impact on their own performance, but also on that of the competitors and on the total market. Your objective as a member of the Top Management Team is to increase the profitability of the company. The environment you are working in is market driven rather than operations driven, considerations are around the top line, handle on costs, to be clear about your offer and delivering value, for example. A checklist of considerations is also attached. How do you gain market share in this simulated environment? Market share is affected by Perceived Price, Quality and Ability to attract customers. The mix of these is called the Competitive Index, part of which is known as the Attraction Index – Location, Advertising, Customer Service, Co. Image -Sensitivity to ecological issues plus previous market share/previous reputation. The company with the highest Competitive Index has greatest potential for sales, but competitive advantage does not guarantee success unless you have the organisational capability to support it.

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Map of Euronet

Perceived Price(Price + promotion)QualityAttraction

Two types of customer

Retail(consumers)

Wholesale(customers)

Buy-In

Price €QualityTerms of payment

OutsourceMake

Using production

Raw materials

Quantity

Process/quality

Outlets

Employees

Promotio

ns

Customer S

ervice

BID

Internally source

Cost & Quality(supplier determined)

MarketingPrice € / Quality

FIN

AN

CE

Import Local

Supplier determines:Cost/quality/delivery

Both

Product Ranges:FabricsFittings

Furniture

Fresh Production

Only

Quantity

Attract

thro

ugh:

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EURONET: A checklist of areas for consideration

Position

Where do you want to position your company in the market? Who is your target audience? What does this mean in terms of market share and volume of products needed for potential customers? Demand

What is the forecast demand for each product in Jan-Mar 2006, taking into account the seasonality of the three product lines? How many products do you need to make available to match your forecast share of this demand? What drives demand in this market? Supply

Do you make, buy in or both to support the volume you hope to sell? What quality of products do you want to put on the market? Operations

What is your manufacturing capability? How can you improve efficiencies and quality levels in manufacturing? Do you source your raw materials locally or from imports? Distribution

Do you have sufficient transport to support these volumes? Do you rely on emergency hire? How do you distribute your products to the customers? How can you add perceived value to your product? Marketing

What are your pricing policies for each product range? Do you sell to Wholesale as well as to retail? How do wholesalers determine choice of supplier? How does the retail market differ? Finance

What is your cash position? What are your borrowings? List what factors impact on your attractiveness. List what factors impact on you competitiveness.

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Key Decisions

Funding

VehiclesQuantity

Training of employees

No. of employees & mix

Environmental

Advertising

CustomerService

Location & no. of outlets

Product promotions

Product price

Buy Finished Goods

MakeHR

Effectiveness

Company Image

Attractiveness Index (company wide)

Perceived Price

Quality

Competitive Index(Product line specific)

Market Share

Shelf space capacity

RM Automation

Imported Local

FINANCIAL

OPERATIONAL

MARKETING RETAIL

WHOLESALE

KeyDecisions

Terms of payment

BidPrice

Quality(RM [import v local]

Automation technology

ITT• minimum quality• maximum price• total quantity requested

DistributionRetail Sales: Goods available - the quantity, quality of goods available and sold and levelof stock of finished goods in the quarter.Retail outlets: Location of competitors’ retail outlets –central and out-of-town locations.

Customer service: the quality of your servicecompared to the market average

Promotions: expenditure compared to the market averageHR: staffing levels and their related effectiveness.Transport: transport capacity; number of vehicles;outsourcing transports.

Decision input area

OperationsStock of Raw Materials: purchases & pending, quantities, quality & valueMachines: number of available machines and production capacityProduction Process: total production & capacityutilisation

Quality of Production: quality of the production process along with total quality of manufactured products.Decision input area

Take a walk through your Virtual OfficesChief Executive OfficeOverview of Your company:Trends of Retained Earnings (Cumulative Profit), Share Value, Market ShareDecision Summary: all decisions taken for your business to date

MarketingRetail: Total Market Demand & Sales trend per product;market shares; competitor pricing, quantity sold and sales valueCompany Image: Advertising & Environmental spends compared with competitorsPositioning: Your company competitive and attraction indices Marketing Info: Economic trendsand forecasts Wholesale: Wholesale minimum and maximum requests; total market sales; your sales and market share Margin: per product – Retail & WholesaleDecision input area

Financial ControlYour Company:Financial Statements –movement of cash, debtors & creditorsProfit & Loss account:– Revenues & CostsEconomic ratiosBank Loan: current borrowing limitDecision input area

ReportsManagement ReportFinancial ReportCompetitor P&L AccountsThe Journal (Crucial market information updated quarterly)Production on-line – % utilisation in the quarterCash needed – Identify cash needed per quarter

Board RoomDecision input areas:MarketingDistributionOperationsFinancial Control

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Participant Brief : EuroNet Business Simulations 1. Marketing Director

The Marketing Director has some key areas of concern in the simulation. Typically, you will look at the issues and solutions in the areas of: • Brand and brand image • Product mix and product quality • Price • Promotion

o Product promotion ; Advertising ; Environmental concerns • Location • Market Research – attractiveness, competitiveness, buyer behaviour • Market Trends/seasonality • Competitor offer analysis 2. Sales Director

The Sales Director has some key areas of concern in the simulation. Typically, you will look at the issues and solutions in the areas of:

• Revenue - Sales to the Retail Market Sales to the Wholesale Market • Selling price of all products • Selling price in all markets • Sales volume versus price • Margins • Retail Outlets capacity • Sales Force – number and effectiveness • Customer Service 3. Finance Director

The Finance Director has some key areas of concern in the simulation. Typically, you will look at the issues and solutions in the areas of:

• Cash Flow monitoring • Profitability/Costs • Loans – borrowing and repayment • Environmental concerns • Financial statements • Payment of Tax • Economic ratios 4. Logistics Director

The Logistics Director has some key areas of concern in the simulation. Typically, you will look at the issues and solutions in the areas of:

• Operations – Purchasing raw materials and Bought-in Finished Goods – Make/Buy

• Production – Production levels, Investment (or disinvestment) in New Production Capacity, Automation for production efficiencies and quality

• Distribution – Transportation, Stock Levels