We have all chosen Spain as a great holiday destination to escape the hard German winters. For a change, we chose Spain to have an educational tour as a part of our executive MBA. The students of Universidad de Málaga and Hochschule Furtwangen came together in five teams, competing against each other in a business simulation game.
All of us were copy-machine selling companies with the same initial economic and technical conditions. The focus of the game was on three aspects of business, namely, Budgeting, Resource management, and Investment decisions. In budgeting, we were required to forecast our expenditures in various fields including corporate image, ecology index, technology index, marketing, and R&D, to name a few. In Resource management, we needed to do our inventory planning, procurement planning, make decisions about the bulk buyers and government bids. Resource management also included hiring and dismissing people, planning production capacity of our facilities. Last but not the least, in investment decisions, we needed to decide our take on short- and long-term loans for the next period. We had four test periods in total, at the end of which, the company with the highest share price would be declared as winners. The whole situation was a prisoner’s dilemma where no one had any idea of what the other team would come up with. At the end of each test period, the professor discusses each aspect in detail and draw a comparison between the five competitors. This would give us an idea where each of us had an edge and where we had room for improvement. We could also get an idea of what was the strategy of our competitors.
In the first period, one company went for a "competitive pricing" strategy which made sure they had high revenues initially. On the other hand, there were two of us, going in for a middle pricing but investing heavily on R&D. Finally, there were two companies going for “high pricing” strategy, which, as they quickly realized, was not working out well for them. By the end of the first period, we landed right in the middle because of some of our decisions. Aspects like motivation, R&D, corporate image, and marketing worked out positively for us, but, like we know, everything has a positive and a negative side. We did a few mistakes that pulled our position down. For example, we underestimated our inventories that led to a shortage of raw materials resulting in decreased production. We also went overtime with our employees due to improper staff capacity planning.
The second period was a "sleeping" phase as we decided neither to expand nor to reduce in size, but just to maintain what he had, sell what we produce, optimize our inventories, and plan our production capacities better. Nevertheless, we kept on investing in R&D and advertising which we believed will help us later. At the end of second period, we were each given a million as private equity which we could invest in any of the other four companies except our own. I personally invested half a million in the company whose strategy was almost in parallel to ours and portioned the rest between the other three companies. There were some strong believers who invested in us. In total, we received a total equity of 4.1 million for the company.
With freshly brewed coffee and some specific goals, we started off the third period. We had won a government bid in the previous period which meant “revenue”. We also had a bulk buyer order to be delivered. Therefore, we expanded everything in the business by 60% more that included huge investments in machinery and staff. This huge change came totally unexpected to our competitors, and we ended up having a huge edge over the others and there was no turning back since then.
The fourth and final round was more interesting than all the previous rounds. While everyone tried to match our figures resulting out of the massive expansion we had, we cut down everything by 20%. This ensured that we saved a lot of costs and therefore resulted in having a positive operating income. This, in combination with several other factors, boosted our share price to be the highest and we won the game.
We were awarded 1,0 for our consistent performance throughout the game. It was a great teamwork that was a right balance of fun and learning. The game was designed with realistic scenarios like shortening of working hours, layoffs, delivery problems and raw material shortages. This gave us on how to approach different aspects of business differently and how we could understand how each aspect was related with one another. Apart from the delicious Tapas, the warmth of the sun, the refreshing oranges, the beach and the beautiful city, an educative experience in Málaga was totally worth it!!!!
was totally worth it!!!!DRAFTJS_BLOCK_KEY:c2fj
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