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User Manual
2014 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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Table of Contents
1. The Business Simulation iBizSim..................................................6
1.1. Structure of the Business Simulation iBizSim.....................................6
1.2. Organization of the Management Team.............................................7
1.3. Management Tasks.................................................................................9
1.4. Company Policy.......................................................................................9
1.5. Analysis and Evaluation of Data - Setting up Indices.....................11
1.6. Methodology for Decision Making....................................................13
1.7. The Products..........................................................................................14
1.8. The Markets...........................................................................................15
1.9. Development of Demand.....................................................................16
1.9.1. General........................................................................................................16
1.9.2. Decisions....................................................................................................16
1.9.3. Demand for Alesa and Bordo in the Markets........................................16
1.9.4. Effects of Inability to Deliver...................................................................17
1.13. Costs......................................................................................................25
1.13.1. Variable Production Costs.....................................................................25
1.13.2. Variable Marketing Costs......................................................................25
1.13.3. Fixed Costs...............................................................................................25
1.13.4. Depreciation Costs..................................................................................26
1.13.5. Stock Value..............................................................................................26
1.14. Financing..............................................................................................27
2014 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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2. Decisions........................................................................................32
2.1. Company Decisions..............................................................................34
2.1.1. Lean Management.....................................................................................34
2.1.2. Payment of Dividends..............................................................................35
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3. Annexes..........................................................................................48
3.1. Capacity Calculations...........................................................................49
3.2. Calculation of Manufacturing Costs..................................................50
3.3. Determining the Change in Stock Value...........................................51
3.3.1. In the Central Store...................................................................................52
3.3.2. In the Branch Store Germany...............................................................53
3.3.3. In the Branch Store U.S.A.....................................................................54
3.3.4. In the Branch Store China....................................................................55
3.3.5. In the Branch Store India......................................................................56
3.3.6. Change in Stock Value..............................................................................57
2014 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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Preface
This course is based on iBizSim: International Business Simulations, a series of business
simulations developed by Prof. Dr. Ashok N. Ullal, Professor emeritus, School of
International Business (now merged into ESB Business School), Reutlingen University,
Germany.
The course is designed to give groups of students working as teams the opportunity to
build and implement an international business strategy for a simulated company
operating in the world markets. The simulated company is located in Germany, has a
production plant initially in Germany, manufactures initially two consumer products
and sells these in four markets, Germany, U.S.A., China and India.
The course emphasizes strategic planning and control and expects you to use your
knowledge and experience from all the other business-related courses in a very
integrated manner.
The simulated company that you will manage:
Purchases
Produces
Transports
Sells
Currencies used
Market
Germany
Currency Euro
(EUR)
U.S.A.
China
India
U.S. Dollar
(USD)
Chinese Yuan
Renminbi
(CNY)
Indian Rupee
(INR)
The balance sheet, the profit and loss account, and the financial accounts will all be
drawn up in Euro.
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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Planthestrategicandoperationalmeasures
Ensuretheavailabilityofresources
Rawmaterials
Machines
Personnel
Capital
Producetheproducts
Alesa
Bordo
Supplythemarkets
1.4. Germany
Company Policy
U.S.A.
China
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
India
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In finance:
In marketing:
Your team should discuss such widely varying and often conflicting business objectives,
even if it means that at the end of the discussion some easily determinable objectives
like company profit or profitability are selected as objectives and used as a measure of
success and hence of ability.
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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Past periods
Current period
Future periods
Set objectives
Define strategy
Plan measures
Develop plans
Purchasing plan
Production plan
Sales plan
Finance plan
Cost plan
Assess alternatives
Take decisions
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1.9.2. Decisions
As at the start of the simulation the products of all the companies are the same, special
significance attaches to the companies sales policy decisions. Their aim is to firmly
establish the name of the products and of the company in the consciousness of potential
customers, to create a competitive advantage for their own products, and last but not
least to increase demand and sales at reasonable prices.
In this, the demand and purchasing decisions of the customers will be determined
partly by their experience with the degree to which the different suppliers are able and
willing to deliver the right goods at the right time at the right price.
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1.11. Image
The market position of the companies, and thus also buyer behavior, are influenced by,
among other things, image. By image we mean the sum total of all factors that
contribute to the public reputation of a company. Cultivating this reputation can lead to
an indirect influencing of customers, and to considerable favorable side effects on the
promotions side. The companies establish standards that - from the point of view of the
customers - provide the best performance.
By adopting the following measures, companies can encourage the desired favorable
attitude of the customers:
Punctual delivery of ordered goods:
Punctual delivery is a strong sales argument. It is - rightly - taken for granted by
customers. It therefore does not improve the regard in which a company is held. On the
other hand, failure to provide punctual delivery damages the companys reputation and
worsens its image in proportion to the degree to which demand in the market cannot be
met. Damage to image is effective in the following period.
Motivation and qualification of personnel involved in marketing:
The products are of a high technical standard and hence require explanation and
guidance from the sales personnel. This puts the motivation and the qualifications of
the sales personnel at a premium. They can be achieved by the training of sales
personnel.
Continuity of prices:
Customers show annoyance with, and lose faith in, companies whose prices fluctuate
greatly between periods.
Payment of dividend:
Dividend payouts up to a level benefits image.
At the start of the simulation, all companies enjoy the same image. This factor has the
value of 100. It is calculated separately for each market in each period. The image of
the companies affects the level of demand for their products: a good image can increase
demand; a poor image can result in a reduction in the demand for the products of a
company.
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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1.12. Production
You are required to set up the production program to manufacture the products Alesa
and Bordo utilizing the available capacities of raw materials, machines and personnel.
The products are manufactured partly from the same raw materials, partly from different
ones. The raw materials are Aurit, Bekat and Calot.
When the financial position permits, it is possible to a balance between demand on the
markets and the necessary production capacity by:
Adapting the working hours by introducing overtime (for a maximum 2
consecutive periods) or by introducing or canceling a second shift. Note that
overtime can only be used when you are operating in single shift and cannot be
combined with the second shift.
Changing the machine capacity by purchasing or selling machines.
Changing the personnel capacity by appointing or dismissing personnel.
Buying in finished units of Alesa.
Buying in finished units of Bordo.
Utilizing excess capacity and producing for stock.
If demand exceeds available supplies of the products, your company cannot meet the
demand, with unfavorable consequences for the company. If demand is lower than the
supply of products available, stockpiling is inevitable. While this increase in stock levels
improves your ability to supply the demand in the following period, it also ties up cash.
Company policy permits a reduction of capacity to a certain minimum number
machines. This minimum number is specifies in the List of Parameters. This means that
you are not allowed to shut down your production.
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Periodn+1
Orderraw
materials
Deliveryof
raw
materials
Rawmaterial
store
Germany
Produce
U.S.A.
Centralstore
Transport
tothe
branch
stores
Deliveryof
boughtin
goods
Order
boughtin
goods
Deliver
tothe
customers
China
India
The entire quantity of raw materials delivered in any period can be processed in that
period.
Only a part of the quantity of finished goods produced in any period is available for
transport to the branch stores.
The entire quantity of bought-in goods delivered in any period is available for
transport to the branch stores.
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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1.13. Costs
For the purposes of costing, the costs can be categorized as follows:
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1.14. Financing
At the start of period 0, all companies possess the same amount of cash. This is reported
in the liquidity account and in the balance sheet.
The List of Parameters defines the minimum amounts of cash that your company must
maintain at the end of a period, and the maximum amount of indebtedness.
All decisions taken by you affect the finances of your company and lead directly or
indirectly to cash inflows and cash outflows.
Directly in the same period: lean production, communication policy, etc.
Directly in the following period: orders of raw materials, machines, etc.
Indirectly e.g. by decisions in the framework of price policy.
In addition, income and expenditure arise e.g. by reinvestment of machine depreciation,
withdrawal from banks of fixed-term deposits, etc.
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Factor
Has affect on
Demand
Price policy
Communication policy
Product policy
Product Quality
Image
Image
Payment of dividends
Punctual delivery
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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Has affect on
Factor
Total Quality
Management
Lean management
Production
technology
Continued
training of
personnel
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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2. Decisions
When you have become familiar with the simulated company, you should prepare and
enter the decisions for the next period.
The course instructors will define and tell you of the specific dates and times for the
entering of these decisions for every period.
It is essential that you enter your decisions by this deadline. Otherwise the decisions of
period 0 will be used as your decisions for the next period.
The decisions fall into the following categories:
Company decisions
Lean management
Payment of dividends
Sales decisions
Product policy
Price policy - sales price
Communication policy - advertising, sales promotion
Distribution policy - marketing logistics
Training of sales personnel - key accounts
Sales branches
Transportation
Market research
Purchasing decisions
Market research
Purchase of raw materials
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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Improved
customer service
Extended
guarantee
Environmentally
friendly packaging
Basic function
= Basic use
Improved
durability
Attractive
design
Fewer parts subject
to wear and tear
= Repair-friendliness
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3. Annexes
Please note that these sample calculations are given to you only to show you the method
of calculation and may not represent the actual values of any period.
Capacity calculation
Calculation of manufacturing costs
Determining the change in stock value
Cell background colors are used in all the following tables to denote different type of
cell values.
Color
Meaning
Value from the Management Report
Value from the List of Parameters
Calculated value = cell with a formula
The sample tables are individual tables of a single spreadsheet. Hence there are cells
that are linked to values from other tables so that values that have been input or
calculated in one table are used in the following tables.
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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175 machines
Workinghours/day
8 hours
Workingdays/period
60 days
Totalcapacityavailable
84,000 machinehours
Fullytrainedworkersavailable
350 workers
Machineallocation
2 workers/machine
Capacityrequired
Productionquantity
Productiontime
Capacityrequired
Alesa
96,000 units
Bordo
36,000 units
Alesa
45 minutes/unit
Bordo
20 minutes/unit
Alesa
72,000 machinehours
Bordo
12,000 machinehours
Totalcapacityrequired
84,000 machinehours
Machinesrequired
175 machines
Fullytrainedworkersrequired
350 workers
Capacitysurplus/deficit
available
required
surplus/deficit
Machines
175
175
0 machines
Workers
350
350
0 workers
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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Alesa
Bordo
96,000
36,000
45
20
72,000
12,000
Total
units
minutes/unit
machinehours
Totalcapacityrequired
84,000 machinehours
Machinesrequired
175 machines
Fullytrainedworkersrequired
350 workers
Productionwage
16.00 EUR/hour
Totalproductionwages
2,688,000.00 EUR
Effectiveproductionwage
Rawmaterialsrequired/unit
32.00 EUR/hour
Alesa
Bordo
Cost
Aurit
units
12.00
Bekat
2 units
24.00
2 units
25.00
Calot
Costofrawmaterials
Alesa
Aurit
36.00
0.00 EUR/unit
Bekat
24.00
48.00 EUR/unit
Calot
Bordo
0.00
50.00 EUR/unit
Totalcostofrawmaterials
60.00
98.00 EUR/unit
Othervariableproductioncosts
40.00 EUR/hour
Productioncosts
Alesa
Bordo
Productionwages
24.00
10.67 EUR/unit
Rawmaterial
60.00
98.00 EUR/unit
Othervariableproductioncosts
30.00
13.33 EUR/unit
Productioncostsbeforerejects
114.00
Rejectionrate
5.00%
Productioncostsafterrejects
120.00
122.00 EUR/unit
10.00%
135.56 EUR/unit
The wages of workers who are receiving training or cannot be productively employed
due to poor utilization of capacity are included in the fixed costs.
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
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Bordo
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Quantity
Value
units
EUR/unit
Initialstock
65,000
120.00
Deliveryfromproduction
91,200
120.00
Deliveryofboughtingoods
Totalstock
10,944,000.0
0
0.00
156,200
Stockvalue/unit
120.00
Transferredtobranchstores
94,000
120.00
Finalstock
62,200
120.00
Changeinstock
2,800
Bordo
336,000.00
Quantity
Value
units
EUR/unit
Initialstock
26,000
134.00
Deliveryfromproduction
32,400
135.56 4,392,144.00
Deliveryofboughtingoods
Totalstock
0.00
58,400
Stockvalue/unit
134.87
Transferredtobranchstores
31,500
134.87
Finalstock
26,900
134.87
Changeinstock
900
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
144,003.00
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Quantity
Value
units
EUR/unit
2,000
120.00
Deliverybytransferfromcentralstore
35,000
120.00
Totalstock
37,000
Stockvalue/unit
Decreasebysales
Finalstock
Changeinstock
Bordo
120.00
36,000
1,000
120.00 4,320,000.00
120.00
1,000
120,000.00
Quantity
Value
units
EUR/unit
1,500
134.00
Deliverybytransferfromcentralstore
14,000
134.87
Totalstock
15,500
Initialstock
Stockvalue/unit
Decreasebysales
Finalstock
Changeinstock
134.79
15,000
500
1,000
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
134.79 2,021,850.00
134.79
133,605.00
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Quantity
Value
units
EUR/unit
1,500
120.00
Deliverybytransferfromcentralstore
23,000
120.00
Totalstock
24,500
Stockvalue/unit
Decreasebysales
Finalstock
Changeinstock
Bordo
Initialstock
Deliverybytransferfromcentralstore
Totalstock
120.00
24,000
500
Finalstock
Changeinstock
120.00
1,000
120,000.00
Quantity
Value
units
EUR/unit
1,600
134.00
9,000
134.87
10,600
Stockvalue/unit
Decreasebysales
120.00 2,880,000.00
134.74
10,000
600
1,000
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
134.74 1,347,400.00
134.74
133,556.00
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Quantity
Value
units
EUR/unit
1,500
120.00
Deliverybytransferfromcentralstore
17,000
120.00
Totalstock
18,500
Stockvalue/unit
Decreasebysales
Finalstock
Changeinstock
Bordo
120.00
18,000
120.00
500
120.00
1,000
Quantity
Value
units
EUR/unit
2,000
134.00
Deliverybytransferfromcentralstore
3,500
134.87
Totalstock
5,500
Stockvalue/unit
Finalstock
Changeinstock
2,160,000.00
120,000.00
Initialstock
Decreasebysales
2,040,000.00
472,045.00
134.55
5,000
134.55
500
134.55
1,500
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672,750.00
200,725.00
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Quantity
Value
units
EUR/unit
3,000
120.00
Deliverybytransferfromcentralstore
19,000
120.00
Totalstock
22,000
Stockvalue/unit
Decreasebysales
Finalstock
Changeinstock
Bordo
120.00
21,000
120.00
1,000
120.00
2,000
Quantity
Value
units
EUR/unit
2,800
134.00
Deliverybytransferfromcentralstore
5,000
134.87
Totalstock
7,800
Stockvalue/unit
Finalstock
Changeinstock
2,520,000.00
240,000.00
Initialstock
Decreasebysales
2,280,000.00
674,350.00
134.56
7,500
134.56
300
134.56
2,500
2013 by Prof. Dr. Ashok N. Ullal, Hoelderlinstrasse 13, 72127 Kusterdingen, Germany
1,009,200.00
334,832.00
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Bordo
Centralstore
336,000.00
144,003.00
191,997.00 EUR
Total
BranchstoreGermany
120,000.00
133,605.00
253,605.00 EUR
BranchstoreU.S.A.
120,000.00
133,556.00
253,556.00 EUR
BranchstoreChina
120,000.00
200,725.00
320,725.00 EUR
BranchstoreIndia
240,000.00
334,832.00
574,832.00 EUR
Total
936,000.00
658,715.00
1,594,715.00 EUR
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