Mgmt 4811

Micromatic SimulationMicromatic Simulation Team and Solo Versions Team and Solo Versions

Mgmt 4812

Introduction Introduction

Simulate the workings of a small manufacturing business

Each team (? in total) will play against each other

Computer just process each companies individual decisions

Administrator (me) acts as owner, banker and industry regulator, union negotiator, etc.

Mgmt 4813

GoalsGoals

Understand the importance of a business and strategic plan to guide business decisions

Understand the relationship between the three main financial statements

Understand the relationship between marketing, operations and finance

Understand the operational issues of production, inventory, plant and labor force

Mgmt 4814

How to approach the simulationHow to approach the simulation

Management is a balance of art (intuition) and science (analysis of facts) combined with group dynamics

To Succeed you should:Manage your time efficiently (stay focused)Manage your business – do not guess at your

decisions

Mgmt 4815

To Succeed you shouldTo Succeed you should

Learn from your failures– Decision rules are the same for every round– Must learn to capitalize of success and recover

from mistakesDo not worry if a little confused at start

– you will quickly move up the learning curve– Simulation requires applying your knowledge not

just listening as in lectures (fundamental shift)

Mgmt 4816

Four Functions of ManagementFour Functions of Management

Planning

Controlling

OrganizingLeading

Mgmt 4817

The Manager as a PlannerThe Manager as a Planner

Must develop the VisionMission Statement & Statement of Goals

& Strategies– Who are the customers, what are their needs

and how will gain competitive advantage– What are your corporate values

Low price /

High volumePremium price /

Low volume

Mgmt 4818

The Manager as a PlannerThe Manager as a Planner

In the Simulation you are responsible for the planning in five main areas

1. Marketing2. Production3. Finance4. Sales Forecasting5. Management Dilemmas

Mgmt 4819

MarketingMarketing – Production – – Production – Finance – Sales - DilemmasFinance – Sales - Dilemmas

Marketing Decisions Pricing

– Price sensitive marketplace unless enticed by stronger marketing efforts (oligopoly)

Promotion– Local newspaper advertising, trade publications, ad message,

salesreps, WWW promotion, product features and quality Market Research

– Can buy Market Research Information (9 types)– Price, local newspaper advertising, trade publications,

quality, WWW, salespersons, product features, units sold, all by Company, Future Sales Potential

Mgmt 48110

Marketing – Marketing – ProductionProduction – – Finance – Sales - DilemmasFinance – Sales - Dilemmas

Production Decisions Ordering Raw Material (order + carrying cost) Product Research and Development # of Units to Produce

– Must have raw material, plant capacity & # of workers # of production workers to hire, fire or layoff

– Begin with 54 workers; can add overtime Amount of production capacity to buy or sell $ to invest in Training

– Improve productivity

Mgmt 48111

Marketing – Production – Marketing – Production – FinanceFinance – Sales - Dilemmas – Sales - Dilemmas

Finance Decisions Short Term Loans (Line of Credit)

– Finance current operations Long term Bonds (mortgages)

– Finance expansion of plant capacity Short Term investment deposits or withdrawals

– Can invest excess cash into stable & conservative short term securities

Mgmt 48112

Marketing – Production – Marketing – Production – Finance – Finance – SalesSales - Dilemmas - Dilemmas

Sales Forecast Decisions Based your quarterly sales forecast on your current

and future mix of pricing, advertising & investment in product quality

– Use this forecast to set production parameters; but no guarantee you will reach these forecasts

– If you misjudge your competitor's actions you will not make the forecast

– Added complication is you do not know what the economy will do.

Mgmt 48113

Marketing – Production – Marketing – Production – Finance – Sales - Finance – Sales - DilemmasDilemmas

Management Dilemmas Periodically will introduce various management

dilemmas– Range from employee theft to union relations to

substance abuse

– There is no right answer in these dilemmas

– Responses to the dilemmas will result in different consequences

– Consequences can effect worker productivity, sales, cost of raw materials or interest rates

Mgmt 48114

The Manager as an OrganizerThe Manager as an Organizer

Must develop the Organizational Hierarchy Organizational Chart

– List of duties & responsibilities for each position Staff the position

– Remember the dual role (student -> friendship) and (manager -> work)

Teams that have an established chain of command do better than “the herd”

Herds tend to take narrow view and focus only on a single issue– Organized groups (specialized functions) tend to keep

broader focus and are much more efficient

Mgmt 48115

The Manager as a LeaderThe Manager as a LeaderMust decide how to influence and motivate members Goal Setting

– Balance of individual’s goal and organizational goal Will you have management hierarchy or team

approach? How will you manage your company? How will you balance the workload? Your peers will evaluate your leadership ability in

both a public and confidential manner How will you motivate under performing

members?

Mgmt 48116

The Manager as a ControllerThe Manager as a Controller

Must deal with issues of controlMust establish a reporting systemMust develop performance standardsMust monitor key performance parameters

and take corrective steps if necessaryMust know the breakeven points for the

manufactured product

Mgmt 48117

The Business EnvironmentThe Business EnvironmentAll companies start from identical pointAll companies manufacture identical

products Manufacturing process consists of forming

raw material (components) into finished consumer product

Produce a commodity => No customer or brand loyalty => you must “earn” each quarters sales

Mgmt 48118

Company publicly heldCompany publicly held

Company is in start-up position – only one quarter’s (Quarter 0) info is available

John & Emily Anderscott developed business but as limited partners not allowed to perform any management duties

You will deliver reports to the board of directorsInitially no difference exists between you and

your competitors’ products– This will change as you modify promotion, pricing,

and product improvements

Mgmt 48119

The Simulation EnvironmentThe Simulation Environment Each decision period is 3 months (1 quarter) Teams make approximately 50 - 100 decisions per

QtrThree stages:1. Forecasting Stage:

– Test “what-if” and modify decisions until have best case

2. Processing Stage:– Administrator accesses decisions of ALL companies to

determine market share allocations and individual company profitability

3. Results Stage:– Teams analyze actual versus forecasted performance.

Use this analysis to forecast next quarter.

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To Do:To Do:Read in detail the summary and study the

decisions and reports and get familiar with the software.

Decide on Company name, organizational structure, individual job titles and responsibilities.

Begin to develop a mission statement & strategy, areas of responsibility, and duties

Mgmt 48121

My RoleMy RoleI will be your

– Banker– Board of Directors– Regulatory Advisor– Union President– And other roles as necessary

Mgmt 48122

As Administrator I Can ControlAs Administrator I Can Control Economic variables (industry demand, costs, and

weightings of performance variables) Introduction of management dilemmas The amount and availability of loans and

mortgages Frequency and Amount of fines (lost passwords,

late submissions, failure to get proper prior approvals, etc.)

Introduce “External Substitute” products. If everybody takes a low promotion strategy I can introduce external substitutes which creates a loss of demand for ALL companies.

Mgmt 48123

Marking SchemeMarking SchemeVariety of methods to assign marks Team performanceThe Strategic Plan (See Assignment 1)Industry Analysis paper (See Assignment 2)Presentation of Company strategy & performance

(last week of classes)Team assignments (log book, periodic reports,

etc.)Joint Peer evaluation and division of points