Computer Manufacturing User Guide April 2012.VN.1.0 PDF

Business Simulation
Computer Manufacturing : Supply Chain SingleUser System Guide

April 2012
Produced by Tycoon Systems Inc
Copyright 2010-2012 Tycoon Systems Inc - page 1
The Computer Business Simulation Game -
Single User Version
The Computer Business Simulation

is an advanced management training tool a dynamic, interactive simulation which emulates real business issues This simulation is a browser-based business simulation, which runs on high speed servers in the USA and Europe. In this way we can deliver results instantaneously and simultaneously to participants all over the world. This document describes the use of the Single User version more information is available in a separate document on a MultiPlayer version You will need a user name and login credentials to start using this simulation. Usernames and passwords will be assigned to you Objectives You will start up a new business, and invest in and launch a range of new products in the computer industry. Your business objective is to build sales, profitability and shareholder value in a complex environment where supply chain effects have an impact on your overall competitive position You can invest in as many business units as you want to, or have available finance for, and across any available sectors. This may, or may not, be the best business strategy to come out on top. Business success will be measured by the share price for your company, which is based on your profitability, using a simple algorithm using Earnings Per Share and P/E ratios Earnings & profitability are directly related to the operating decisions that you take. These decisions will add - or destroy - value for your shareholders. Item Entering the Game Simulation Overview Structure of the Market Starting your Business Simulation : Terms of Use Page 3 7 8 11 38
Index Scroll down or click on a link to go there
Single User Version
THE SINGLE USER SIMULATION MODEL This User Guide deals ONLY with the Single User system a separate document details the MultiPlayer version. This will be available in advance of the sessions for that system In the Single User Simulation individuals can log into our servers from anywhere in the world, 24/7, and practice using this advanced business simulation in their own time - and at their own convenience. In this system, we have also created some Virtual Intelligent Players (VIPs) for you to compete with programmed players who can spot strategic gaps in the system which you may have overlooked. They may or may not invest in such opportunities; but they will definitely provide some extra competition for you that you have to deal with. THE MULTIPLAYER SUMULATION MODEL The MultiPlayer Business Simulation, which requires all participants to be logged in at the same time. In this format, complete teams will log in and compete in real time against other teams during a timed competition. The Single User version does not have this requirement login is individual and can be at any time, day or night DIFFERENT PARAMETERS AND DYNAMICS ARE EVIDENT IN THE MULTIUSER GAME, although available features will be mainly the same as in this Single User model PARTICIPATE Before you can use this simulation, you MUST Participate to START by clicking the button shown below
Single User Version
TIME GIVEN TO MAKE BUSINESS DECISIONS When you have clicked Participate, the simulation will start automatically. The first period is a familiarisation period of 20 minutes. The system will automatically move to the next quarter after this time. The following 12 periods represent business quarters of 3 months each. The system automatically moves to the next quarter after 10 minutes. When the system arrives at Quarter 12 (of 12), the simulation will stop. Your last simulation decisions will be made when the screen shows Quarter 11 of 12. This is because the results displayed and the labels shown are for the immediate previous quarter All decisions made by any player in each period will have to be made within these time intervals. The time available until the next tick, or quarter change, will be shown at the top left of the screen, below the spinning globe. This is shown as the number of seconds left in the decision period : 10 minutes is 600 seconds, 20 minutes is 1,200 seconds
You can speed up the process and manually advance to the next quarter, if you have made all the decisions you want to make. You do not have to wait for the system to arrive at the 10 minute mark. You can click on Next Quarter at any time. After the system has moved to a new quarter, all results are updated and new data is displayed, such as market shares, closing inventory levels and financial position for all companies in the game. The total maximum running time of the simulation is therefore 140 minutes = 20 minutes startup plus 12 x 10 minutes You can exit the simulation by clicking Leave Simulation. If you have already started making decisions, the simulation continues to run automatically until the end, and you will be awarded whatever default score results from letting your company run itself
Single User Version
The Computer Business Simulation Game (Single User Format)

You will participate in a dynamic business environment, where you will start a company to manufacture, promote or sell a range of products in the computer industry Your competitors in this business will be Virtual Intelligent Players (VIPs) pre-programmed players which analyse opportunities in the market in light of the decisions that you have made, and then will act according to their predefined policies. There are no other companies competing with you, outside of this group The market is extremely dynamic, with growth mainly dependent on the decisions of all the companies involved in the market. Any competitive pressures that develop will be a result of the combined actions of all the competitors in the simulation including the VIPs Your company You will take over a company that has a budget of $132M available to invest in your choice of computer industry production and retail facilities. Initially you have NO PRODUCTS in your portfolio, so your first job is to think about investment opportunities, and make some early decisions about which direction you wish your company to go in. Your first task is to make a decision to invest in one or more products or retail sectors. Your investment budget is a mix of Shareholder Equity Capital and Loan Capital (Debt) and will change as you make investment and other operating decisions. Your cash position will also vary as you make these decisions, and the system will give you additional loans should you need them (for example, if you make losses). You do not need to make any decisions regarding extra loans these are automatically calculated for you Your companys credit rating may fall or rise depending on the amount of debt you have to take to support your companys activities and on your ability to service interest payments on this debt. Taking debt is essential to allow for your expansion, but a large level of debt may see your credit rating fall from the AAA score you start with. If you start to make good profits from your investments, then your credit rating will improve back towards AAA. In this simulation, your credit rating is a function of your interest coverage ratio The Market Value of your company is a function of your profitability based on EPS and P/E ratios. If you make good operating profits, then your share price and market capitalisation will rise. If you make losses then your share price and market capitalisation will fall. Your initial Market Value is $60M, with no upper limit as you proceed. If you manage your business badly, then your company value may fall to very low levels. If you continue to lose money, then you could be forced into bankruptcy, where your assets are liquidated and you have to leave the management of the business
The Computer Business Simulation Game Structure of the market
Single User Version
The personal computer market is made up of three sectors components, systems and retail. These sectors are interdependent in various ways. Companies in the Components Sector supply all the constituent parts of a personal computer such as monitors, hard drives, keyboards, cases, operating systems etc. You can make a choice to invest in several of these product areas. These Components are supplied to companies in the Systems sector Companies in the Systems Sector use components to build complete computer systems - such as laptops, desktops, netbooks, server systems and the like. Profitability in the Systems sector can be dependent on competitor activity and pricing that comes out of the Components sector. Complete systems are sold to companies in the Retail sector Companies in the Retail Sector buy complete computer systems that have been produced by companies in the Systems sector and sell them to consumers and business customers. Profitability in the Retail sector can be dependent on competitor activity and pricing in the Systems sector. Initially, all companies in all sectors have an equal chance of achieving similar profit levels. No one sector has a better or worse opportunity to make money than any other. Profitability is dependent on the management decisions you make as you control your company, and by the dynamics of the evolving market place. The sectors have quite different cost structures, which means that the required management styles in each sector may be different. Not all markets may be sufficiently mature to invest in for the first quarter or so of the simulation so they may not be available to you. You can invest or other sectors, or you can wait for them to develop scale
Decisions you can take

Once you have decided to invest in one or more business lines, you will be able to set competitive selling prices, adjust marketing budgets, control the amount of product you are manufacturing in your factories, invest in additional capacity to grow your company, or determine the amount of purchasing you need to maintain inventory levels in any retail units you have. You will be able to adjust the level of spending or investment in customer service, product quality improvements, research & development on new products, and investment in warranties & guarantees. This will allow you to differentiate your company in the eyes of your customers when they compare your offering with those of your competitors, in addition to your pricing, marketing and availability profile There are additional opportunities to invest in special operations which may improve your cost, demand or cash flow position these include global sourcing of production, contract manufacturing arrangements, or investing in real-time order processing systems Under certain conditions you can issue further shares to bring in more capital from investors, which may allow you to make larger investments and grow at a faster rate, or to acquire other competitors who may appear attractive. You may also buy back shares from the market, if you have available cash and you wish to limit the number of shares available to investors (so raising your share price).
Single User Version
The option to buy (acquire) other competitors will become available after one year of operations, and represents an opportunity to expand quickly, if other companies fit with your company strategy and portfolio. Acquisition my not be your best solution, and may not be available to you if you have insufficient funds. Note : Some decisions can be reversed within any given decision period others are permanent. Be careful with your decision-taking. Decisions must be taken within a certain time period set by your instructor. There is no exception allowed the system will proceed even if you have not made a specific decision, and will assume that you are happy with your current status and settings.
Drivers of profitability Good profitability will results from having good selling prices, lower cost prices and overhead cost levels which are appropriate for the business you have developed. It will also depend on you developing a strong portfolio of businesses - where you have a good market position which can be defended, and is sustainable against attack from your competitors. As your share price is a function of profits, you will need to understand how effective selling prices and costs prices vary with competition, demand and product ageing. To generate high share prices and high market capitalisation values, you will need to make good operating profits The main issues you should be aware of : a. Supply and Demand Balance in each product/market sector how do average selling prices in each market vary with the level of supply in that market ? How does maturity and the Product Life Cycle affect demand ? What is the impact of market crowding, of concentrated or of fragmented markets ? b. Economies of Scale how does price vary with the volume produced, or with market share? c. Overhead costs how are central costs spread across increasing volumes ? How does profitability increase with increasing scale ? What is the meaning of synergy and its associated cost savings ? d. Supply Chain Effects what is the impact of upstream or downstream competition on your costs of supply or your selling prices ? e. Merger and Acquisition activity : what is the impact of market concentration as a result of takeovers ? f. Strategic Positioning : how do individual company decisions - in relation to their strategic positioning affect their cost and demand position ? You will have access to many financial reports and charts, which will show how you are performing, and indicate possible courses of action. A full Income Statement, Balance Sheet and Cash Flow is published for every business quarter, so you can track your financial performance in detail
Single User Version
Products and Sectors - Investment Required for each product line Components Manufacturers
Operating Systems $48m
LCD Screens $72m
Keyboards/Mice $23m
Optical Storage $27m
Cases $21m
Power Supply $18m
Motherboards $30m
HD Storage $30m
Memory $36m
CPUs $120m
Computer Systems
Blade Servers $132m
Servers $132m
Workstations $110m
Desktops $44m
Tablets $55m
Netbooks $66m
Laptops $77m
Computer Retailers
Computer Stores US $23m, EU $27m AP $20m
B2B Distributor US $35m, EU $37m AP $33m
E-Shop US $20m, EU $25m AP$18m
The Computer Business Simulation Game Starting your business
Single User Version
You need to take a number of decisions to launch your new business in the early stages, it is difficult to assess the value of each market, or your likely success, as you have no competitor information, and detailed market information is hard to come by. But you have to make a decision one that you can live with. a. Invest in a Business Portfolio Review the products and sectors you could be interested in, decide how much you want to invest, and set initial prices, marketing budgets and production volumes. Review the detailed information for each product (extra guidelines below). Some product lines may not be available for investment at the start of the simulation because of immature technology, limited intrinsic demand at this stage of the game, or other factors. Products will be released for launch over following quarters as markets develop and demand increases but there will still be a wide choice of investment opportunities from the start. You may have to delay putting together your ideal portfolio until certain products are ready to launch b. Operational Decisions : Set Initial Prices: you will not know how to set these precisely, as you have no direct competitor information. But we have set some mid-range prices in the simulation you could keep to these, or adjust in line with your overall strategic positioning (see below). You will need to adjust Marketing Budgets as these are set to a minimum. The production decision sets the level of output you want this will depend on your expected marketing position and volume of sales. If you have invested in any Retail business, you will need to make additional decisions about the level of purchasing from your suppliers that you wish to make You MUST employ staff when you open a business unit if you no staff, you will have zero production c. Strategic Positioning Decide on an overall corporate policy with regard to customer service levels, product quality, research and development, and extended warranties. Decide what sort of company you want to be a low cost volume producer, perhaps, or a high quality, higher-priced niche player with smaller market shares. Review the later section on How to compete d. Additional Investments : Depending on your available budget, and the type of businesses you have chosen to invest in, there may be additional opportunities for you to fine tune your business. Review the Additional Investments panel at the bottom of your screen these are special situations you may want to take advantage of. Many are specific to certain sectors, so be careful to review them carefully dont invest in situations which do not enhance your business position. For example, the Content Provider Tie Up applies only to Computer Systems manufacturers if you have invested solely into Components, this will not have an impact on your business at all but will cost you a lot of money each month e. Later on, you will have additional decisions to make related to expansion (upsizing), contraction (downsizing), market withdrawal (liquidation), issuing shares, buying back shares or possibly acquiring a competitor. For now, the list of actions above is enough The following sections detail how each action is completed, and shows other details of your operations screens
The Computer Business Simulation Game Making an investment starting your business
Single User Version
Decide which business sector you wish to focus on, and which products you may want to launch on the market. To select a business unit, choose one of the methods shown here. The screen below allows you to select a business unit sector, and also shows a chart of the current supply level in the sector (how much of the market is currently supplied by existing competitors) Choose View more details
Single User Version
The Supply Level concept shown on the chart is discussed later but it indicates the current level of participation by all companies in each sector of the market. Other information shown is the number of competitors currently operating in each sector, typical investment levels required, and the product life cycle of products in that sector (retail is set at 36 months, the others at 20 months). You will next be taken to a screen which shows you 2 important charts : Supply Levels, and Initial Investment Required
Supply Levels : This shows the current supply level in each business market what is the percentage of current demand that is met by current suppliers who are in the market ? Markets with low supply levels are more attractive as they have fewer competitors more competitors could mean lower average market prices. In the early stages of the competition, supply levels will tend to be lower than in later stages, when markets become more saturated. Read the section Supply Levels and Market Pricing later in this guide for more information
Initial Investment : How much do you need to invest in each business to operate one business unit ? As you expand in the future, you may find yourself wishing to invest in multiple units in certain business areas each one will require the investment shown to purchase the plant, distribution and operating infrastructure.
Single User Version
Below these, you are offered a choice of investments click on View Details to see more information before choosing to invest. You are also show the number of existing competitors in this particular market, and the effect of adding one more business unit to the supply system (Supply Level +1x = what is the supply level after you add 1 x business units to the market) The next screen gives you detailed information about each business unit how much you need to invest, product and life cycle information, supply level data, market pricing and maturity.
You will also see Upstream and Downstream Supply Chain information. The Upstream data show which other products are included in the supply chain, and what contribution those elements make to the current product ie what percentage by value each of those elements comprise this product. The Downstream data show which markets are most important for this particular product. In the example above, Memory contributes 10% by value to the cost of producing Laptop Computers, and Laptops generate 26% of all sales in the Computer Stores US market. If you wish to add this product to your business portfolio, then click on Launch Product your cash balance will be reduced by the amount shown, which will also be taken out of your available investment budget. The equipment and other operating assets required to run this business unit will be added to your financial statements Once you have made this decision, it is a permanent action there is no possibility to reverse it, except by liquidating the business at a later stage. Make sure you really want to proceed before clicking on Launch Product
Single User Version
If you wish to add more products, click on Invest Now again to choose another investment. You can continue to add products to your portfolio until your investment budget is exhausted. You will be informed if your budget is not large enough to launch individual products.
In the early stages, you have no option but to accept this later on you will have an opportunity of issuing more shares to increase the amount of cash available to you. Operating decisions After choosing your initial investments, you will be returned to your main operating screen. Products selected will be now shown as part of your business portfolio (see below), and you can now start to adjust several business parameters. Any adjustments you make will be reported in the following business quarter you will not see an immediate impact to your financial or business position reported on the screen as you make these changes.
Moving the slider shown - to the left or to the right - will reduce or increased your offered price to the market. This will be your advertised price that customers can choose to accept or reject. It may not be the final price you will sell at this is also determined by supply and demand imbalances in the marketplace. Review the section on Market Pricing later in this document. High prices may increase profit margins, but may also discourage sales and lead to higher levels of unsold inventories this may give financial stress to your company. Lower prices may increase sales volumes, leading to a higher market share, but could also lead to lower profit margins and possible operating losses. Pricing policy is a major tool for better business management .
Single User Version
Other information shown includes some small charts on revenues to date, profits and sales history for this business unit. Clicking on the gold tabs shows additional information: the Sales tab is shown above the Marketing tab is shown here :
Change and set a marketing budget to promote your products a larger marketing budget will encourage higher sales, but will also depend on other actions you take. You will need to manage inventory levels too much money tied up in stock means you will come under financial and cash flow pressure. Too little and you could be losing sales to competitors, as your customers will not be able to able to buy your products Competitors information will be shown at a later date as you start to compete with other firms, and you will have an opportunity to Expand (Upsize), downsize or liquidate your business position at a later stage The Production decision is important in the early stages of your business development :
Move the slider to set your desired production rate too high compared to your expected rate of sales will build inventory too quickly; too low a production rate will lead to stock-outs, lost sales and lost profits. Retail decisions - If you have decided to invest in any retail business units, you will have some slightly different decisions. Some fields are the same (sales price, marketing, competitors and expansion others are new:
Single User Version
The Purchasing decision is similar to the Production decision, and allows you to set the levels of inventory you will buy for re-selling in your retail units. If you do not purchase enough inventory compared to your expect rate of sale, you may run out of stock, lose sales and market share. If you purchase too much inventory and do not sell it, you will tie up cash unnecessarily and create downward price pressure in your market (excess inventory at retail level leads to increased price competition) The Warehouse tab shows your current investment in inventory, and the capacity of your warehouse. If you have too little warehouse space for the level of sales, then your warehouse will always be used to the maximum (utilisation %) , but your sales volumes may be constrained. Carefully manage purchasing levels as well as your investment in new warehouse capacity
Expansion of your facilities will be offered later in the simulation, depending on various factors. You must have funds available to expand with either from your initial capital, from loans, from operating profits retained in the business, or from capital raised by selling new shares. If the supply level forecasted as a result of any expansion is expected to exceed certain high levels, you will not be allowed to expand excessive expansion and saturation of markets is inhibited. If the market is only very immature, expansion is not recommended. And if you have a poor credit rating, you will not be able to expand and you may put your business at further risk
Single User Version
Critical Staff Decisions Each business unit you open will need staff to run it you need to decide on employee numbers, salary levels and training levels.
Adjust staff numbers using the green + and red - buttons to get close to the target number of staff indicated. The first number next to the Employees label indicates CURRENT staff numbers in this business unit, the second number indicates the STANDARD number of staff needed in an ideal situation. When calculating the recommended staffing levels (target numbers) for a production unit, the system assumes your staff are 100% qualified and 100% motivated. Note : Staff Attrition : 0.5% of your staff leave every month.
If your staff are NOT 100% Motivated and 100% Qualified, then they will work at lower rates, producing at a low productivity rate. Motivated staff work efficiently low motivation indicates you will need MORE than the standard number of staff. Higher Salary levels increase motivation levels in subsequent quarters :
Single User Version
Qualified staff work more efficiently low Qualification levels indicate you will need MORE than the standard number of staff. Higher Training Spending will increase qualification levels in subsequent quarters
Check Workload levels regularly to see if your HR strategy is effective Other decisions you need to make : Strategic Positioning : Towards the top of your screen you will see the Strategic Positioning Panel here you will set various parameters to try to differentiate your company from competitors. The four choices you have are : a. b. c. d. Customer Service Budget Product Quality Budget R&D / Innovation Budget Extended Warranties Budget
By moving the sliders to the left or right you can increase or reduce the budgets in the coming quarters. The settings remain the same until they are changed again. Each setting has an impact on various cost and demand factors for example, in the settings chosen above, Customer service investment has been reduced to a lower level leading to a possible reduction in staff costs of 9%, but customer satisfaction Is estimated to fall by 18%, leading to a potential loss of sales, with demand falling by over 4%. Other settings and other variables offer different outcomes. Your decisions here should be consistent with your view of your overall corporate strategy.
Single User Version
Remember that cost structures in each of the three sectors (components, systems, retail) are quite different choosing a high setting here if you have invested in a high cost sector may lead to problems. You have to be consistent in your decision-making. Additional Investments Further differentiation can be achieved through selective special investments :
Six choices of special investments are offered some of these require an upfront capital investment, which can be a oneoff decision, or may have a validity period. After this period a fresh investment is required. Other options require continuous spending on a monthly basis, with a limit to the validity period. After this period a fresh decision will need to be made Each of these decisions have a different impact on your cost structure, cash flow or demand positions. Some decisions are specific to certain business sectors for example, an outsourcing investment in Contract Manufacturing is only relevant to Components Businesses, where Materials and Staff costs are reduced. But this would have no impact on any businesses you have in Systems or Retail it would be wasted money. Most of these decisions are single investment decisions - which may or may not repeat in future years. You can take multiple decisions for Contract Manufacturing up to three contracts can be taken (click the OK button 3 times), with a cumulative cost saving of up to 30% in Material and Labour costs. The contracts needs to be renewed every year, or they will lapse
Single User Version
Review the graphic above to see the proposed impact of each decision. Take note of whether the benefits and costs apply to ALL sectors, or just to individual sectors After you have clicked OK for any of these investments, a red tick will appear in the box indicating you have agreed to this investment. If the investment needs to be renewed, this tick will disappear and the box will revert to OK again Other decisions you can take Retail : Be careful with Inventory Planning for Retail a 10-day inventory represents pipeline inventory the stock that is on order or in the distribution system it generally cannot be sold, and represents the bare minimum before shelves are empty in-store. You should increase purchasing if you consistently see this level of inventory
Expansion option: If you have sufficient investment budget available to you - this changes every quarter depending on your performance - you may be given the option to expand your business. Product maturity should be in a growth or mature phase, and the Supply Level Forecast should note not in excess of 100% The expansion or Upsize decision will be charged against your investment budget, the cash removed from your bank account, and operating assets added to your balance sheet. This means that you can add 1x business units to your operations so increasing the scale of your business, benefitting from Economies of Scale to push your average cost of production down. You also gain market share as you set up to become a larger market player, thereby becoming a price-setter/price-leader, instead of being a price-taker/price-follower
Click on the Upsize button in the Expand area, to immediately invest in a larger business unit. The button will also show the investment required to effect this expansion. You will see a green tick when one of these options is available in the Expand tab
Single User Version
Liquidation option: When a product has a very high maturity, or is consistently making losses, you will be given the option of liquidating (disposing, or closing down) your business unit.
In the event that you choose this option (available in the Expand tab) , you need to click the Liquidate button, and your business operations will close down, and be removed from your balance sheet and operating screen. You will receive an inflow of funds to your company bank balance, being the written down value of net assets which have been sold off or disposed of Relaunch option: Products with high maturity (mature or decline phase) may not be achieving the previous high sales and profitability levels that were evident in the growth phases. Depending on the profitability, you may be offered a further option that of Relaunch. This refreshes the product new design, new packaging, new advertising programs etc and effectively rejuvenates it. This means that sales would once again continue to grow, offering higher prices and profits extending the life of the product
Click on Relaunch (the cost is noted on the button) to rest your product range to re-gain lost sales
Single User Version
Growth through Acquisition : Taking over a competitor One way to speed your growth is to acquire another company in the market place. You will be offered the opportunity to bid for a competitor after 4 quarters (1 year). If you have sufficient funds available, then this offer will be made in the Takeover panel onscreen. If you do not have an investment budget available at that time because you have invested everything in other projects, or have been making operating losses, then this option will not be available to you. You may even find yourself the subject of a takeover form another competitor. The weakest five competitors at any time will be displayed in the Takeover Panel and bids invited for them. The takeover bidding process takes 2 quarters (6 months) to complete. If you make a bid for any company during the first quarter, then your bid remains online until the bidding closes at the end of the next quarter. During this time, other companies may place a higher bid than yours, and may be successful in acquiring the target company ahead of you. You have the opportunity to increase your bid, if you suspect that another company is trying to beat you to the finish line. There is no guarantee that your bid will be successful the highest bidder will win. At Quarter 4 of 12 : a screen like this will appear:
If you do not have funds available to bid, then Make Bid buttons are not visible. In the following screen, the bids are announced, but you have no opportunity (or buttons) to make an offer
The suggested bid prices shown on the bid buttons are based on the target companys equity price plus a bid premium. The price will vary depending on the financial strength and success of that company. Businesses which are not performing well will be cheap to buy companies with good performance and share prices will appear expensive. There has been a large amount written about the value and pricing of acquisitions. You should consider buying a company if there are some likely synergies between your operations and those of the target. Synergies (cost sharing, cost savings) in this simulation occur mainly within sectors, not across sectors so an acquisition which increase your scale economies and expand similar product lines will offer the best results. Once you have made a bid, you have the opportunity to Cancel (at a cost), or to Raise the Bid if you think there are other companies bidding for this target.
Single User Version
Should you be successful, the result (and price) of the takeover will be announced via the news ticker at the top of the screen, and above the Takeover panel.
There is no guarantee of success in post-acquisition merger activity. You will have to work hard to integrate the new operations into your own. The Acquiring Company will pay the amount of its bid from its cash balances and investement budget, and will receive all assets and liabilities of the target coimpany into its financial statements (consolidation). All products and business units from the target company ae now combined with the acquiring companys operations, increasing scale ecoinmies where possible. In iother words if your coampny already had a 1x operation in for example memory components, and you acquired a company which also had a 1x operation: your updated operations would be sized at 2x. An example of consolidating balance sheets is shown below, where assets and debt jump up, post-acquisition.
Single User Version
The Acquired Company will receive the amount of the bid in cash, but will lose all of its product and business lines it has no operating business at this point. It has to start again. It can use the cash from the bid to invest in new product and business lines effectively starting over. One aspect which may not be immediately clear, is that good investments at this point may be difficult to find. Many markets may be saturated, with high Supply Levels and many participants. The investment budget available may be too small to invest in some interesting markets you should consider immediately raising new cash with a share issue, to increase the size of their investment budget Issuing New Capital : Shares Issues and Buyback Companies can issue new shares or offer to buy them back from the market - at almost any time during the simulation. If you require more money to expand, or to acquire a competitor, this may be an option you should consider. The price of the shares for issue or buyback will depend on the current market price of the shares if you issue shares you receive this value, less a broker fee. It make sense to issue shares when your share price is high and buy them back when the price is low, or when you have excess cash and nowhere to invest it When you issue shares, the number of shares outstanding increases (reducing the price per share somewhat dilution) To issue or buy back shares, go to the Financial Planning module in the middle of your screen
Click on the Issue New Shares button (or Buy Back button) several times to receive / spend multiple amounts of cash
The Computer Business Simulation Game Other Business Indicators and reports
Single User Version
Corporate Dashboard At the top of your screen, a summary of your business performance
Indicators include your current share price, and the rate of change; the current investment budget available to you, your seed equity and corporate credit rating (in this simulation, a function of debt ratio, or the amount of money you have borrowed) Gauges show Revenue Growth, Profit Margin (EBIT), Debt Ratio (the amount of loans you have) and Profitability in terms of Earnings per Shares (Net Income divided by the number of shares outstanding) The grey marker is your performance; the white marker is the group benchmark (group average for all companies). A result in the green section would be considered good performance; a result in the red section would be considered poor performance Who is winning ? The Real Time Scores panel shows the leader table at any time. This is updated every quarter, and shows a summary table listing Company name (with the number of business invested), their Strategic Positioning summary, Credit Rating and Debt Ratio, Sales Revenues, Profit Margin (EBIT %), Equity capital (Funding) and Share Price (with direction of latest move)
The Strategic Positioning column is explained as follows : C=Customer Service; T= TQM/Product Quality; R= R&D / Innovation; E = Extended Warranties. The colour coding indicates : if the letter is Red, then the company has reduced its spending in this area; if the letter is Green, then this indicates the company has increased its spending on this element; if the letter is grey, then the spending is mid-range, although it may not be central.
Single User Version
Below this a chart showing the evolution of share prices for your company and the current leaders
The share price (in this simulation) is derived as a multiple of corporate profits - the PE Ratio. If you are making good profits (earnings) then the multiplier will drive your share price up. If you are making losses, or very low profits, then your share price will be driven down. For simplicity sake, the lowest share price is set at $10, even when you are making losses, to reflect future prospects and current asset values. Other competitive data is displayed in a series of charts on the Real Time Scores page.
Single User Version
Other data can be found on Individual Product pages : Each product summary page reports on Competitor Position and activity in that product. The following table and chart shows revenues, market share, selling and costs prices, and other data for two competitors in the Power Supply Market:
Single User Version
The following chart, from the same webpage, shows profit margins of all competitors in this market, including the effects of a takeover (Fast Circuit and Entrepreneur)
The Computer Business Simulation Game A Final Word Hints on playing the simulation
Single User Version
1. Decision Checklist Initial settings a. Decide on one or more product sectors to invest in and make the investment. b. Set selling prices and marketing budgets for each product, set production levels for manufacturing, or purchasing levels for retailing. c. Decide on a suitable Strategic Positioning Policy set levels of customer service, quality, R&D spend, and extended warranties spending d. Choose appropriate Additional Investments, depending on the product sectors you are focusing on e. After the first business period has passed, evaluate any competitor activity, and adjust your own strategy and tactics to match your expectations and plans f. Invest in more business units as you progress, should you wish to. g. Consider upsizing your production units to create a larger scale of operations (potentially larger market share and lower production cost). You may also consider downsizing or liquidation in some circumstances h. Later, consider expansion through acquiring a competitor
2. Playing Hints a. Focus on one sector - as there are intra-sector synergies, but no inter-sector synergies. b. Dont over-invest right at the beginning, as you might run out of capital early. c. If you run out of Inventory, raise your selling prices. d. If you have invested in sectors with a high material cost base, be careful with HI settings for Quality, Innovation and Warranties in the strategic Positioning Panel e. Use Additional Investments only if they are relevant to your chosen product portfolio - and also if the volume of your business is big enough to make them cost-effective (spreading the cost over a larger volume of sales) 3. After taking over another company, make a detailed check of production/purchase volumes. 4. Issue new shares to expand your business - once it becomes profitable, when you get a higher price for your shares 5. Expand each business unit, to get economies of scale and larger market shares. 6. Consider downsizing or liquidation if a business unit is in a heavily over-supplied industry, where you may be losing money - if you have other business units that are profitable. 7. Buy back shares if you run out of good investment opportunities in the final year. Summary of sectors : PLC Investment Material Cost Components Short High Low Systems Short Medium High Retail Long Low High
The Computer Business Simulation Game Appendix ADDITIONAL STRATEGY and MARKETING ISSUES
Single User Version
Economies of Scale and Scope With increasing volumes of production or sales of a product or a range of products, central overheads and other costs start to spread across a larger base. The cost of production per unit, or the cost of delivery per unit, will therefore start to come down. If you can build market share and generate extra sales from the same cost base, then the average cost per unit will continue to decrease, and profitability will rise. This is called Economy of Scale unit costs will reduce to a level where the overhead part of your cost structure is relatively small compared to the direct, variable costs of manufacturing, delivery or service. The cost reduction per unit is not a straight line relationship, which will forever decline - more of an exponential curve which reaches an optimum operational cost level. Market share-driven cost reduction is a major factor in creating profitable operations in a many businesses in the world today Cost sharing benefits are also evident when you increase a range of products that can share the same operational expense base such as a common sales force, a customer service center, or a logistics system. This is referred to as the economies of scope
Additional cost reductions may occur as a result of experience or learning sometimes these cost benefits are shared across industries (industry learning) as techniques and knowledge get passed around, or staff move between companies. A company that is striving to become a cost leader in its industry will focus heavily on driving costs down, including the application of economies of scale and experience curves. A key driver in this simulation is relative cost advantage, because of the high fixed cost / high fixed asset investment nature of the industry. You can improve your cost advantage with greater market shares
Single User Version
Supply Levels and Pricing - Market Crowding Fragmented Markets In each product- market, providers individually decide to invest in extra facilities, in order to satisfy the demand for the services they offer. Overall industry demand is a function of the size of the economy, and the rate of growth of this economy is related to the investment decisions of all the competitors in the simulation. The demand for individual product-services is also related to the size of the economy, as well as to adjusting factors such as pricing, price changes and value propositions. The degree to which the market for each product is currently satisfied is referred to as the Supply Level : the percentage of current demand that is satisfied by current providers. As players expand and continue to invest in new facilities, the supply of product available to customers will increase so the supply level goes up. Each new investment decision leads to the establishment of an extra warehouse unit with a fixed capacity the capacity increase is referred to as 1x, 2x, etc. Additionally, where you have invested in retail operations in the COMPUTER INDUSTRY Simulation, the supply is directly linked to the inventory available for sale in all players warehouses. This means that if many players are purchasing larger amounts of inventory (which may remain unsold) then the perceived supply ratio will rise, thereby depressing average market prices If new competitors enter a segment with new investments, the market becomes even more crowded and supply levels also increase. When supply levels rise well above 70%, the market average price level will start to decline customers will have a wider range of competing products to choose from, and will start to bargain for lower prices. Providers then need to start making attractive marketing offers to maintain or grow their sales volumes A Supply Level of over 100% leads to much lower profit margins in the industry even driving some providers into losses. You should be aware of Supply Levels in all the market segments where you are operating. As you and your competitors make investment and inventory purchase decisions, the supply level will change quickly this will affect your ability to raise or even maintain high prices. Your competitive position is closely linked to Supply Levels in your markets. Wherever possible, try to invest in and promote businesses where Supply Levels are relatively low, to give you a better chance of survival and higher profitability.
Single User Version
Market Dominance and Pricing As you invest in new product lines and associated warehousing, you will increase the Supply Level for that product, but also increase the market share available to you. In this simulated market, investment in products and facilities increases the scale of your operations, and can also reward you with a larger share of the market. Other factors, such as pricing and marketing spend, will also have an effect on your demand and market share, but the scale of your operations is a major factor. To grow market share then, it is important to continue to invest in new product lines and warehousing units Because of the effect of scale economies, profitability is closely linked to higher market shares, and the market will also reward you with slightly higher prices in effect you become a price leader, not a price follower. At some point, continued investment in extra product and facilities in a particular market will increase the Supply Level to unsustainable levels; pricing comes under pressure, the industry has excess capacity and sales may fall. At this point, market share is less important as losses could mount up Synergy is important . By concentrating your efforts in one sector at a time, you will spread overhead cost efficiently, so reducing unit cost to the lowest levels. Or at least try to limit the number of sectors you invest and trade in. You could develop a significant cost advantage over your competitors in this way there are other factors which also affect this. Investing in too many sectors is a way to lose competitive advantage Additional Investments are important up to a point ! You can choose to invest in a number of operating enhancements for your corporation. These investments can offer some significant costs savings and develop additional demand for your products. You may not have sufficient budget to invest in them all so choose wisely. These are substantial investments, and when the cost is spread over a large enough business then these could add a lot to your financial performance. If you have a smaller business perhaps because you are at an early stage, or maybe you have underinvested then these additional investments might be too large a burden for you. Invest wisely, and you can make a big difference in this area. Balance your product investment and these additional investments for maximum impact If you have any products which are losing significant amounts of money, then you may be offered the option to liquidate those product lines.
The Computer Business Simulation Game FINANCIAL MANAGEMENT
Single User Version
Debt and Leverage Every quarter, your Treasury Department notifies you of the investment budget the amount of money available to you for expansion or redevelopment of your business. This is made with reference to the level of credit agreed with your main bankers, based on the current availability of credit, your credit standing and your current level of borrowing. The investment budget is made up of seed equity available to you from your shareholders, and loans available from the bank. Your INITIAL SEED CAPITAL is $60M Your Available Budget for investing will normally be Your Capital + 120% x Your Capital in Bank Loans. Example $60M + $72M = $132M Credit rating is based upon your ability to pay interest charges. A credit rating of AAA would be exceptionally high, indicating low borrowings and higher profits: D will be the lowest rating, before bankruptcy. Leverage is also a term used to indicate debt ratios use of leverage can boost profitability in your company. You can expand faster, leading to higher market shares, more dominant pricing, and scale economies.
FINANCE AND ACCOUNTING REPORTS

At the bottom of your main company screen are a Balance Sheet, Income Statement and Cash Flow. These reports automatically update each quarter.
The Computer Business Simulation Game BUSINESS TERMS
Single User Version
Annual Report An official quarterly or annual financial document published by a public company, showing Income Statement, Balance Sheet and Cash Flow Statement. Balance Sheet Quantitative summary of the financial position of a company at a specific point in time, including assets, liabilities and net worth. The first part of a balance sheet shows all the productive assets a company owns, and the second part shows all the financing methods (such as liabilities and shareholders equity). The term balance sheet is derived from the simple purpose of detailing where the money came from, and where it is now. The balance sheet equation is fundamentally: (where the money came from) Capital + Liabilities = Assets (where the money is now). Hence the term double entry - for every change on one side of the balance sheet, there must be a corresponding change on the other side - it must always balance. Capital Invested Money (borrowed or owned) invested in a company's operations. Calculated by: Total Assets less Excess Cash minus non-interest-bearing liabilities. The sum of a corporations long-term debt, stock and retained earnings. Also called invested capital. Cash Currency and coins on hand, bank balances, and negotiable money orders and checks. Cash Flow Cash receipts minus cash payments over a given period of time; or equivalently, net profit plus amounts charged off for depreciation, depletion, and amortization. Cash Flow Statement One of the three essential reporting statements for any company. The Cash Flow statement provides a third perspective alongside the Income Statement and Balance Sheet. The Cash Flow statement shows the movement and availability of cash through and to the business over a given period. The availability of cash in a company that is necessary to meet payments to suppliers, staff and other creditors is essential for any business to survive, and so the reliable forecasting and reporting of cash movement and availability is crucial. Corporate Social Responsibility (CSR) Corporate Social Responsibility is a concept whereby companies integrate social and environmental concerns into their business operations and in their interaction with their stakeholders (employees, customers, shareholders, investors, local communities, government), on a voluntary basis. Cost of Goods Sold (COGS) The directly attributable costs of products or services sold, (usually materials, labour, and direct production costs). Sales less COGS = Gross Profit. Also called Cost of Sales, or Cost of Services and Goods Sold
Single User Version
Credit Rating A published ranking, based on detailed financial analysis by a credit rating agency, of ones financial history and forecasts, specifically as it relates to ones ability to meet debt obligations. The highest rating is usually AAA, and the lowest is D. Banks use this information to decide whether to approve a credit. Current Assets A balance sheet item which equals the sum of cash and cash equivalents, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that could be converted to cash in less than one year. A companys creditors will often be interested in how much that company has in current assets, since these assets can be easily liquidated in case the company goes bankrupt. In addition, current assets are important to most companies as a source of funds for day-to-day operations. Debt A liability or obligation in the form of bonds, loan notes, or mortgages, owed to another person or persons and required to be paid by a specified date (maturity). Debt Ratio Debt capital divided by total capital. This will tell you how much the company relies on debt to finance assets. When calculating this ratio, it is conventional to consider both current and non-current debt. In general, the lower the companys reliance on debt for asset formation, the less risky the company is since excessive debt can lead to a very heavy interest and principal repayment burden. EBIT Earnings Before Interest and Tax. A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and non-operating profit before the deduction of interest and income taxes. Equity Ownership interest in a corporation in the form of common stock or preferred stock. It is the riskbearing part of the companys capital and contrasts with debt capital has priority over shareholders if the company becomes insolvent and its assets are distributed. Gross Profit Pre-tax net sales minus cost of sales. Also called gross income. Gross Profit Margin Gross profit divided by sales, expressed as a percentage. Interest Cost The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower, and the inflation rate. Here, interest per year divided by principal amount, expressed as a percentage. Interest Rate A rate which is charged or paid for the use of money. An interest rate is often expressed as an annual percentage of the principal. It is calculated by dividing the amount of interest by the amount of principal. Interest rates often change as a result of inflation and Central Bank policies.
Single User Version
Long-Term Assets On a balance sheet, the value of a companys property, equipment and other capital assets expected to be useable for more than one year, minus depreciation. Net Income Sales minus taxes, interest, depreciation, and other expenses. Net Income is one of the most important measures of a companys performance, since the pursuit of income is the primary reason companies exist. Sometimes Net Income includes one-time and extraordinary items, and sometimes it does not. Also called net earnings or bottom line. Income Statement An official quarterly or annual financial statement of a public company, showing earnings, expenses, and net profit. The Income Statement typically shows sales revenues, cost of sales/cost of goods sold, generally a gross profit margin (sometimes called contribution), fixed overheads and or operating expenses, and then a profit before tax figure (PBT). Basically the Income Statement shows how well the company has performed in its business activities during a specified period Return on Equity (ROE) Return on Equity. A measure of how well a company used reinvested earnings to generate additional earnings, equal to a fiscal years Net Income divided by Equity, expressed as a percentage. It is used as a general indication of the companys efficiency; in other words, how much profit it is able to generate given the resources provided by its stockholders. Investors usually look for companies with returns on equity that are high and growing. Return on Investment (ROI) A measure of a corporations profitability, equal to a fiscal years income divided by Long-Term Assets. ROI measures how effectively the firm uses its capital to generate profit; the higher the ROI, the better Sales (Revenues) The final amount of sales, determined by subtracting the amount of sales returns and allowances and sales discount from the total amount of sales, for a fiscal period. Inventory (Balance Sheet) A companys merchandise, raw materials, and finished and unfinished products which have not yet been sold. There are various means of valuing these assets, but the most common one is to price all inventory at the cost that it was acquired for, or its cost of production in the cases of finished goods, or net realisable value (what it could fetch in the marketplace), whichever is lower or more conservative Taxes Taxes are compulsory, unrequited payments, in cash or in kind, made by institutional units to government units; they are described as unrequited because the government provides nothing in return to the individual unit making the payment, although governments may use the funds raised in taxes to provide goods or services to other units, either individually or collectively, or to the community as a whole. Total Assets The sum of current and long-term assets owned by a person, company, or other entity.
Single User Version
General Terms and Conditions for use of simulations owned by Tycoon Systems Inc. Tycoon Systems will allow use of its online simulations (TS Services) to users under the following general terms and conditions. 1) TS Services include, but are not limited to, access for selected individuals to Tycoons business simulation systems, business games and web-based software, for use in executive education programs and on-line business competitions, on payment of access fees as specified in an agreed Scope of Services. 2) These General Terms and Conditions will form an integral part of any agreement to supply such services. 3) Where a supply of TS Services involves access to Tycoon Systems webservers and websites then, the terms and conditions as specified on the websites are deemed to have been read and understood and agreed prior to using such TS Services. A current example is available for inspection at http://www.industrymasters.com/termsofuse.html 4) Tycoon develops online, webserver based simulation games, which reside on their own secure webservers, and are under their control at all times. It is not possible to install these games on any other servers for example, on clients own web servers. Clients may access our simulations and games via standard, widelyused web browsers such as Internet Explorer, Firefox etc from anywhere in the world by using a standard URL which we will supply. 5) Intellectual-Property Ownership and Use: No proprietary software is required to be physically installed on clients systems, and no ownership of software is transferred to clients. All Intellectual Property Rights of any business simulation, except Pre-existing Materials from clients, shall remain exclusively with Tycoon. 6) Any Tycoon Systems simulation that is based on real-world events is only representational and not an accurate depiction of real-world events. Users should under no circumstances seek to imitate any game experience in real life. 7) Privacy Considerations: In order to take advantage of the full capabilities of the simulation and to receive emailed information and announcements, Tycoon may require information about the users. Any communications made through the simulation may be monitored by Tycoon's personnel, with the consent of the client. We respect the users privacy and we will, of course, endeavour to take care of any information supplied to us. We reserve the right to use "cookies," which are small computer files we would thereby transfer to your computer's hard drive to allow us to monitor website usage. The users have the ability to accept or decline cookies, but if users choose to decline cookies, performance of the simulation might be adversely affected. 8) No Warranty: The simulation, including any content or information contained within it and any linked website, is provided "as is" and "as available." TO THE FULLEST EXTENT PERMITTED BY LAW, Tycoon EXPRESSLY DISCLAIMS ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. 9) Limitation of Liability: Tycoon shall have no liability for the deletion of any communications or information collected, maintained or transmitted by the simulation or the failure to store any information, including personalized settings. 10) Jurisdiction and Choice of Law: All claims regarding the simulation shall be governed according to the laws of the State of Delaware, United States of America, without regard to its conflicts of law principles. Any claim or action arising under this agreement shall be subject to the exclusive jurisdiction of courts in Delaware, United States of America. 11) Complete Agreement: This agreement constitutes the entire agreement between the User and Tycoon with respect of use of simulations owned by Tycoon Systems Inc. If any provision of this agreement is found to be unenforceable, the other provisions shall still remain in full force and effect.

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Business Simulation

Computer Manufacturing : Supply Chain SingleUser System Guide

Produced by Tycoon Systems Inc

Copyright 2010-2012 Tycoon Systems Inc - page 1

The Computer Business Simulation Game -

Single User Version

The Computer Business Simulation

Index Scroll down or click on a link to go there

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The Computer Business Simulation Game -

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The Computer Business Simulation Game -

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The Computer Business Simulation Game -

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The Computer Business Simulation Game (Single User Format)

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The Computer Business Simulation Game Structure of the market

Single User Version

Decisions you can take

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The Computer Business Simulation Game -

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The Computer Business Simulation Game -

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Operating Systems $48m

LCD Screens $72m

Optical Storage $27m

Power Supply $18m

Blade Servers $132m

Computer Stores US $23m, EU $27m AP $20m

B2B Distributor US $35m, EU $37m AP $33m

E-Shop US $20m, EU $25m AP$18m

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The Computer Business Simulation Game Starting your business

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The Computer Business Simulation Game -

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The Computer Business Simulation Game -

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The Computer Business Simulation Game -

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The Computer Business Simulation Game -

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The Computer Business Simulation Game -

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The Computer Business Simulation Game -

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