BUSINESS STRATEGY GAME

FINAL TERM REPORT

PROF. TRANG DINH TOAN

BY
PRIYANKA SIMRAN
AMI9B
APRIL 12, 2019
INTRODUCTION
In order to get on with this Business Management Simulation game, one has to think
of him/her as the CEO of an emerging startup with an employment contract of 3
years, which is 12 quarters. Strategic and operational decisions are to be taken in the
prime areas of Finance, Supply Chain, Human Resources, Advertising, Research and
Development (R&D) and corporate strategy.

The strategy game is played on an excel workbook file that records all the inputs in
the second worksheet. The first worksheet contains a “decision box” with questions
that demands decision-making for the following: i) How many units to produce? ii)
How to price it? iii) How much to spend on marketing? iv) How many employees to
hire or fire? v) How much to invest in R&D?

WORKSHEET 1

In the above picture, it can be seen that one is provided with:

i) An income statement that displays the revenue, expenses incurred,
generating of profits and cash in hand, thereby assessing the performance
and financial position of the company.
ii) A simulation game with the help of a “decision box” displays the inputs
the CEO decides to gamble with.
iii) The game’s Quarter 1 begins with pre-conditioned inputs for the
following:
Revenue = $450,000, Operating profit = $150,000, Cash in Hand =
$1,000,000
Total Demand = 10, Inventory = 10, Manpower = 4 employees, Salary =
$50,000 Unit price = $15,000

GOAL: To maximize cash in hand as much as possible.

FINDINGS
To start the game, I first experimented with units of production multiple times with
different combinations to see what led to increase in cash and what led to decrease in
cash. I started with 19 and ended up reaching up to 79 because the maximum limit is
80. I figured out some co-relations like:
1) R&D costs co-relate with unit price.
2) Unit costs directly co-relate with how many new customer orders we have and
how much money we have to put into advertising costs to continue to get new
customers.
3) Inventory is 3 Qtrs. slow. It goes through production, in-transit, and in-
progress and then it finally reaches inventory. So we should try and keep it as
high as possible without leading it pile up in backlogs however.

START BUSINESS STRATEGY GAME

Quarter 1 – 5:

QUARTER 1-5
No.
Of Cash in
Qtrs. Produce Unit price hires R&D Advertising Hand
START 0 15,000 0 0 0 1,000,000
2 79 19,500 0 50,000 50,000 795,000
3 79 19,500 0 50,000 50,000 615,000
4 79 19,500 0 50,000 50,000 1,381,500
5 79 19,500 0 50,000 50,000 2,227,000
Analysis:
I maxed out the production units to 79 due to the reasons mentioned in the Findings
above, hired 0 people because mathematically I found the already hired 4 people are
enough to meet the demands without exceeding costs on the wages. I picked the unit
price to be $19,500 and again maxed out the R&D to which unfortunately is only
$50,000 and I put the same amount $50,000 for advertising costs. Initially the
operating profits were going negative in the second and third quarter which can be
perplexing to watch but because in business there is no 100% right or wrong, I
decided to go forward up to 5 quarters to verify whether my intuitive strategy works
or not. And from the fourth and fifth onwards the operating profits turned into
positive figures and so did my cash in hand increasing to $2,227,000.

Quarter 6 – 12:

QUARTER 6 - 12
Unit No. Of Cash in
Qtrs. Produce Price Hires R&D Advertising Hand
5 (Cont.) 79 19,500 0 50,000 50,000 2,227,000
6 79 19,500 0 0 50,000 3,122,500
7 79 19,500 0 0 50,000 4,018,000
8 79 19,500 0 0 50,000 4,568,500
9 79 19,500 0 0 50,000 5,107,500
10 79 19,500 0 0 50,000 5,635,000
11 79 19,500 0 0 50,000 6,151,000
12 79 19,500 0 0 50,000 6,655,500
Analysis:

As I kept experimenting, I saw the unit price was decreasing from $7,500 to $5,000,
which meant that we could produce more with less cost from now on, also can be
referred to as achieving economies of scale which is actually a great thing for a startup
like ours to have. Therefore I decided to stop spending on R&D any further and as
you can see in the above picture, R&D from qtr. 6 -12 is 0. Even in the second half I
chose to maintain the manpower at 4. From my previous several attempts on hiring
and firing people, I came to a conclusion that not doing anything is sometimes the
best decision.

Another perplexing moment was to see backlogs piling up. Initially I was very
aggressive towards managing backlogs but after several attempts and reading few
articles about supply chain management, I realized that a backlog in few quarters
doesn’t do much harm. In reality, people do this us all the time.i Because I had an
intuition about the strategy that I was applying, I continued and played along to see
my backlogs that had piled up 3rd qtr. to 7th qtr. appeared to all clear out from the 8th
qtr. onwards.

As I advanced to the 12th quarter, my cash in hand has skyrocketed from $1,000,000
to an amount of value $6,655,500.

CONCLUSION
Business strategy game is a very intuitive game that only gets better after many trial
and errors. The key things that I learned at the end were to always seek for
equilibrium between supply and demand. Invest in advertising to attract more
customer orders and spend on R&D to attain economies of scale. Backlogs are not
bad but should not be neglected either.

REFERENCES-
i https://www.supplychaindive.com/news/help-wanted-supply-chain-labor-risk-ignored/528314/

https://www.mbacrystalball.com/business-strategy-game