Executive Student Briefing Paper 2015 - 16 v1-2

Department of Engineering
EG2017: Business Simulation 2015/16
Student Briefing Paper and Simulation Guidelines
The
Business Simulation
Driving the learning experience …
Facilitators
Hugo Williams and Martin Rhodes
CONTENTS
1 SYNOPSIS ........................................................................................................................................................... 2
2 INTENDED LEARNING OUTCOMES ..................................................................................................................... 3
3 THE SIMULATION ACTIVITY ............................................................................................................................... 3
4 TIMETABLE OF EVENTS ...................................................................................................................................... 4
5 KEY MILESTONES, SIMULATION REPORTING REQUIREMENTS AND MARKING CRITERIA ................................. 6
st
5.1 Student Briefing Session – Wednesday 1 October 10.00 in BEN LT1 ................................................ 6
5.2 Business Strategy and Branding .......................................................................................................... 6
5.3 Access to the Simulation File ............................................................................................................... 6
5.4 Annual Management Report and Business Performance Review ....................................................... 6
5.5 Group Learning Review ....................................................................................................................... 7
th
5.6 Poster Presentation – Friday 12 December ...................................................................................... 7
5.7 Attendance .......................................................................................................................................... 7
5.8 Assessment .......................................................................................................................................... 8
6 BUSINESS SIMULATION PARAMETERS ............................................................................................................... 8
6.1 Market Dynamics ................................................................................................................................ 9
6.2 The Starting Position ........................................................................................................................... 9
6.3 The Financial and Economic Environment .......................................................................................... 9
6.4 The Marketplace ................................................................................................................................. 9
6.5 Product Design and Options .............................................................................................................. 11
6.6 Research and Development .............................................................................................................. 12
6.7 Pricing and Profit Margins ................................................................................................................. 13
6.8 Production ......................................................................................................................................... 13
6.9 Personnel........................................................................................................................................... 14
6.10 Advertising/Promotion ...................................................................................................................... 14
6.11 Market and Competition Research ................................................................................................... 15
6.12 Finance .............................................................................................................................................. 15
APPENDICES
APPENDIX I - THE EXECUTIVE BUSINESS SIMULATION - MANAGEMENT TEAM ROLES .............................................. 17

APPENDIX II – DECISION FORM .................................................................................................................................. 20
APPENDIX III - ANNUAL MANAGEMENT REPORT TEMPLATE ..................................................................................... 22
APPENDIX IV - KEY PERFORMANCE INDICATORS ....................................................................................................... 23
APPENDIX V - COST AND DATA SHEET FOR ROUND 1 AND R&D DETAILS.................................................................. 24
APPENDIX VI – MARKET RESEARCH ON PROMOTION/ADVERTISING ........................................................................ 27
APPENDIX VII - TYPICAL MANAGEMENT AND FINANCIAL REPORT ............................................................................ 31
APPENDIX VIII - INSTRUCTIONS FOR USING EXECUTIVE IN THE BUSINESS SIMULATION EVENT ............................... 37
APPENDIX IX - FREQUENTLY ASKED QUESTIONS ........................................................................................................ 40
APPENDIX X – SUMMARY OF FINANCIAL RATIOS ....................................................................................................... 42
APPENDIX XI – ATTENDANCE CRITERIA FOR GROUP MARK CREDIT .......................................................................... 43
APPENDIX XII – BIOGRAPHIES OF ENGINEERING ICONS ............................................................................................. 44
Page 1
1 SYNOPSIS
The purpose of this briefing paper is to prepare you for your participation in a business simulation called Executive, which
is based on the passenger car market in Europe.
You will work as part of a management team, which collectively has the opportunity to establish and manage a design,
engineering and manufacturing business that competes in this market. The decisions you will make cover a wide range of
business skill areas from planning and finance to marketing, business strategy, risk management, human resources,
effective interpretation of information, presentation/communication skills. You will also assume specific management
roles for the simulation from those that are available (see Appendix I).
The simulation is fully interactive so your team will be competing in a real time marketplace against live and background
competitors. There is the opportunity to explore, experiment and then evaluate your knowledge, judgment and decision-
making before submitting a set of business decisions for processing through the simulator. Your company will make and
sell cars into the European market. Responsibilities include decisions on a wide variety of aspects, for example:
 your team structure and responsibilities

 your company brand, image and objectives,
 the target market,
 the type and quality of product to be produced,
 its price and how it will be promoted to the market,
 the size of the workforce and the level of productivity,
 the investment in research and development and new products,
 financial parameters such as the level of borrowing, payment terms for customers and suppliers.
A decision form summarising the decisions to be made is given in Appendix II on page 20. The form will be available on
Blackboard and you are strongly advised to keep a record of all the decisions made for your reference.
There will be 32 teams taking part in the simulation activity involving approximately 180 students from several
engineering disciplines – each team will comprise around 5/6 students. Four different European markets will be
established as Simulation Worlds and 8 teams will compete ‘live’ in each World. Each World will have a unique name and
you will be allocated a unique team number in the range 1 to 8. You will name your own company, design its logo and
business strap line (e.g. TESCO’s is Every Little Helps). You will undertake an online psychometric self-test to enable you
to allocate roles within your teams.
The simulation will run for 4 years with each trading period (50 weeks) representing a full calendar financial year. The
annual financial year runs from 1 October to 30 September and you will commence trading in financial year 2015/16. The
final year of trading will be 2018/19. Remember this is a live simulation activity reflecting the real world situation … and
projecting forward … so you will need to be thinking about what the global economic and European market conditions
might be like in the future.
Prior to the start of the simulation you will be asked to determine the type of car company you want to establish and
present an Executive summary of your outline business strategy and plan. This will contain your business values, a note
of the key stakeholders and their needs, the market(s) you intend to operate in, the types of products you intend to
engineer, produce and sell and a note of some of the risks and threats you expect to face during the activity. In your
business strategy and plan you must also describe how your team is organised, using the results of the psychometric self-
tests.
The simulation will operate over the Internet and you will be required to submit your annual business decisions
electronically to a timetable for processing. A set of financial statements and business reports will be produced by the
simulation and be available to you within a few days. You will then review these statements and reports and prepare an
annual management report announcing your results and describing your achievements and challenges. The annual
management report is to be submitted through the usual assignment process. A standard template for this report is
shown in Appendix III (it will also be available on Blackboard). The management report will be required for each trading
year when you complete your report.
For the fourth year we shall ask you to prepare a report of your results in the form of an A2 poster for display at a
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presentation and awards event to be held on Friday, 12 December. You will also be asked to review how your team is
working on the business simulation activity and to record your learning experiences. We shall provide you with an
information pack that will facilitate this group review activity.
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2 INTENDED LEARNING OUTCOMES
The aim of using the Executive business simulation is to give you an insight into how engineering systems become
profitable products. This topic has never been more important than it is today because it has become widely accepted
that engineering holds the key to ‘re-balancing’ the UK economy, restoring economic growth and ensuring that the UK
remains competitive in a global economy.
After completing the simulation exercise you should be able to:
1. Analyse financial results to determine the success of business strategies and plans.
2. Produce a business strategy, taking account of internal and external factors, review and amend it based on financial
results and market forecasts.
3. Produce, implement, review and amend a sustainable business plan that takes account of the relationships between
the numerous elements that make up a whole business entity.
4. Prioritise capital investments and Research and Development (R&D) expenditure to support the business strategy
and plan.
5. Collectively delegate responsibilities for individual projects based on the strengths and interests of individual team
members.
6. Present business performance and conclusions based on that performance accurately, succinctly and professionally.
7. Review and appraise your performance, and that of the team, constructively to identify areas for continuous
improvement.
8. Appreciate the wider role of business in supporting technology development and manufacturing.
3 THE SIMULATION ACTIVITY
During the course of the simulation module, you will be required to handle a number of different projects, namely:
 Establish and name your own company

 Allocate the management roles
 Decide on the type of company you and your colleagues want to manage
 Prepare and submit a summary of your business strategy and plan
 Specify a portfolio of products (maximum of five)
 Initiate a marketing communications programme using a portfolio of media
 Make 4 sets of comprehensive business decisions over a 3 month period
 Manage the financial dynamics of the company (sales, profits and cash flow)
 Undertake an individual open-book blackboard assessment on basic financial calculations
 Conduct a series of Group performance self-reviews
 Prepare 3 annual management reports
 Prepare a poster that communicates your final results and journey
 Prepare and submit a paper that reviews how your group performed and what you learnt
A coherent and consistent approach to the execution of all the business projects will help to ensure a satisfactory
outcome. However, there are some important core principles you need to adopt as you prepare to embark on the
business simulation activity. You need to:
 Choose the right business options – the type of company, the markets you trade in and a robust portfolio of
products
 Set clear business and team objectives – gain clarity on what it is you want to achieve
 Manage the individual components effectively – meet the simulation deadlines
 Be able to identify and manage the unexpected event – ‘things’ happen in business, just when we least expect
them to
 Be aware of the developing competitive nature of the environment – markets and competitors are ruthless and
no quarter is asked or given… you need to be able to cope with and respond positively to competitive pressures.
You will also have to manage a series of discrete business related projects associated with investment decisions, e.g., you
are likely to plan and execute the launch of a series of new products. This will take up to 2 trading years to fully complete
so advance portfolio planning will be essential.
Your shareholders are expecting a return on their investment of 18% after taxation within a 4-year timeframe. This is not
likely to be such an easy task in the highly competitive environment in which you will be operating.
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4 TIMETABLE OF EVENTS
Date Event Time Commentary

This document available on You may wish to print a copy of this document, or save it in an
Mon
blackboard, intro email 18.00 electronic form so you can annotate it during the student
28 Sept
sent out to all students. briefing session.
Student Briefing Session 10.00- Introduction to simulation; presentation about basic parameters
(in BEN LT1) 11.00 and your what contribution will be.
PREP
Wed
30 Sept Group allocations
11.00 Group allocations will be posted on Blackboard
announced
Team building, team roles, start to develop company strategy
Fri 10.00-
Group working session and identity. Micro-teach sessions on team working and basic
2 Oct 13.00
financial terms.
10.00-
Group working session
Wed 12.00 Opportunity to make decisions before the live simulations start.
7 Oct Pilot run of the simulation Start work on inputs for pilot run.
10.00
opens
Start work on detailed business plan based on results from pilot
run (see section 5.2). Analyse results and ensure that you
10.00- understand what the financial data tells you. Continue to
Fri Group working session
13.00 develop strategy and identity. Micro-teach sessions on company
9 Oct branding and stakeholder requirements. Start your Group
PILOT
Learning Review.
Submit pilot decisions 13.00 Deadline: submission of decisions for the pilot run
Results of pilot 10.00 Results of the pilot run will be available in team simulation file.
Wed
14 Oct 10.00- Time allocation for continuation of business plan. Micro-teach
12.00 session on risk management.
10.00- Complete your business plan. Live simulation event starts. Begin
Fri 13.00 making decision for Year 1 trading.
16 Oct Submit team business
13.00 Teams submit Business Strategy and Brand on Blackboard
plan
ASSIGNMENT
INDIVIDUAL
Tuesday Complete individual Final deadline for completing Individual Assignment on

17.00
20 Oct assignment on Blackboard Blackboard. This activity is completed in private study time.
Wed 10.00-
Group working session Working on your decisions for Y1 of trading
21 Oct 12.00
10.00-
Fri Group working session Back in your teams to finalise decisions for Y1 trading.
13.00
23 Oct st
Submit Year 1 decisions 13.00 Deadline for submission of decisions for the 1 year of trading
Results of Year 1 10.00 Results are available in team simulation file.
Wed 28
10.00- Prepare Management Report for year 1 trading and complete
YEAR 1
Oct Group working session

12.00 Group Learning Review.
st
Continue preparation of 1 year management report and work
10.00- nd
Fri Group working session on decisions for 2 year of trading. Simulation files available for
13.00
30 Oct year 2 of trading from today.
st
Submit Report 13.00 Submit 1 Management Report on Blackboard
10.00-
Wed Group working session Finalise decisions for Year 2.
12.00
4 Nov nd
Submit Year 2 decisions 12.00 Deadline for submission of decisions for the 2 year of trading
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Date Event Time Commentary
Fri
10.00- Prepare Management Report for year 2 trading and work on
6 Nov Group working session
13.00 Group Learning Review.
YEAR 2
Prepare Management Report for year 2 trading. Begin

10.00-
Wed Group working session decisions for Year 3. Simulation files available for year 3 of
12.00
11 Nov trading from today.
nd
Submit Report 12.00 Submit 2 Management Report on Blackboard
10.00-
Group working session Decisions for year 3 and work on Group Learning Review.
Fri 13.00
13 Nov rd
Deadline for submission of decisions for the 3 year of
Submit Year 3 decisions 13.00
trading.
YEAR 3
Wed Review results of Y3 (no formal management report required

10.00-
18 Nov Group working session for Y3). Begin decisions for Year 4. Simulation files available
12.00
for year 4 of trading from today.
10.00–
Group working session Decisions for year 4 and work on Group Learning Review.
Fri 13.00
th
20 Nov Deadline for submission of decisions for the 4 year of
Submit Year 4 decisions 13.00
trading.
Wed Results of Year 4 09.00 Results are available in team simulation file.
25 Nov 10.00- Prepare Management Report for year 4 of trading and
YEAR 4
12.00 business performance review and poster.

10.00- Prepare Management Report for year 4 of trading and
Fri Group working session
13.00 business performance review and poster.
27 Nov
Submit Report 13.00 Submit Management Report for Y4 and Business Review
Prepare poster and poster presentation. Micro-teach session
Wed 10.00-
Group working session on poster presentations. Draft poster and presentation
2 Dec 12.00
should be completed by the end of this session.
10.00- Practice poster presentations with peer-feedback. Revise
13.00 posters and presentation appropriately.
Fri
Submit posters to Blackboard for printing. This is a critical
4 Dec
Submit posters 13.00 deadline to allow time for the posters to be printed – you
have been warned!
POSTER
10.00- Preparing group learning review and completing the peer

12.00 effort survey.
Wed
Submit Group Learning Review to Blackboard. Hand-in hard
09 Dec Submit Group Learning
12.00 copy of Group Effort Survey to Hugo Williams or Martin
Review
Rhodes.
Students to present posters of their work to external and
Fri Poster Presentation 10:00 to internal members of staff (10 minutes per group including
11 Dec Session 13:00 questions and answers). Further details and a timetable for
the day will be published nearer the time.
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5 KEY MILESTONES, SIMULATION REPORTING REQUIREMENTS AND MARKING
CRITERIA
5.1 Student Briefing Session – Wednesday 30th September 10.00 in BEN LT1
The purpose of this session is to formally introduce you to the simulation event and make a presentation about
what you might expect to encounter along the way. .
We will also provide you with a demonstration of how the simulation works and explain the types of decisions
that you will be required to make each trading year. We will also explain the management reporting and
group review requirements during this session. You will have the opportunity to ask questions about the
simulation during this briefing session.
5.2 Business Strategy and Branding

You will be required to prepare and submit an outline of your business strategy and plan in Powerpoint. A
template is provided on Blackboard. Your submission should contain the following information:
 The name of your company, its logo and strap line

 The company mission statement
 Your management team and their Executive roles (see Appendix I for details of the available roles)
 A list of the key stakeholders (those who have an interest in your success) and their primary needs
 An indication of the market sectors you intend to compete in initially and the type of products you
intend to offer into those markets (you are required to launch two in year 1)
 A summary of the potential internal (team) and external (market) risks, challenges and threats that
you expect to face during the simulation activity
 Three key learning goals and a short description of what success will look like for your team at the end
of the simulation event
5.3 Access to the Simulation File

We will allocate a unique team password to your team and this will be used to enable your team to access
your company files during the simulation. You will receive an e-mail notification of your unique password.
5.4 Annual Management Report and Business Performance Review

Each team is required to prepare an annual management report for all trading years except the third year.
This report will be produced to a standard template, see Appendix III (also available on Blackboard), and will
cover the following aspects:
 Business results for current and prior year covering:

o Number of employees
o Sales – volume and value
o Gross profit £
o Operating profit £
o Cash at bank
o Outstanding level of debt
o Value of unsold stock at the year end £
 Key financial ratios
o Gross profit margin %
o Sales margin %
o Return on shareholders’ funds %
o Return on capital employed %
o Current ratio
o Return on assets %
 A short commentary on performance, note changes from previous year as well as any particular
challenges that the company faces and your priorities for the following trading period.
We will provide you (on Blackboard) with a "Glossary of Financial Terms" that explains the financial terms used
in the reports from the simulation and an explanation of how the key ratios are calculated and what they are
designed to indicate. There is a sample set of management and financial reports included in Appendix VII and
a summary explanation of the key Financial Ratios in Appendix X.
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A Business Performance Review should be submitted with the final (fourth) annual management report. It
should summarise the performance of the business over the four trading periods. Your discussion should be
based on the business results and the key financial ratios. You can refer to the four management reports in
this business performance review (Appendix III).
5.5 Group Learning Review

Each group will be required to conduct periodic reviews of how they are working on the simulation activity and
to record their learning experiences. A formal review process document will be available in Blackboard and
the requirement is for each group to conduct reflective reviews during the simulation activity. The final Group
Learning Review will be used as the basis for the preparation and submission of a Team Performance Report
(single A4 sheet of not more than 600 words) that summarises your experiences during the simulation and
records your key learning arising from the simulation activity.
5.6 Poster Presentation – Friday 11th December

th
It is essential that posters are submitted via blackboard by 12.00 on Friday, 4 December to allow time for
printing. Normal late penalties will be applied, but more importantly, if you are unable to present a poster
because it hasn’t been printed in time you will obviously score low marks.
th
Your printed posters will be available in the foyer of the Engineering building on Friday, 11 December. You
must arrive at a specified time and put the up in the space allocated. A group of judges, including external
representatives from industry and the wider University will be assigned to each World. Although optional,
teams are encouraged to wear suitable business attire to present a professional image of themselves and the
Department.
Each company presents its poster to the group of judges for about 4 minutes. The CEO should introduce the
members of the team to the judges. Each member of the team should talk about a part or parts of the poster.
Teams may wish to talk about:
 Key points from their mission statement or business plan
 Their cars and the markets they are intended for
 Key performance indicators – and how these evolved during the 4 trading years
 An analysis of their performance – what they might do differently next time
 What they learnt as students
 Other aspects associated with their company/group
The presentation should last about 4 minutes. The judges will ask questions. In total the presentation and
questions will last about 10 minutes. Marks will be awarded on the quality of the poster and the presentation
and how well the questions were answered. Other members of University staff may also be circulating looking
at all posters and may ask some questions of each team.
There will then be feedback and prize giving sessions, at which certificates will be awarded for the winner of
each World and the best poster in each World.
The winner of each World will be invited to nominate an engineering icon to provide the name for a World
next year – so please have a think about who you might like to nominate beforehand. We like to change these
every year, so please choose someone other than those listed in Appendix XI.
5.7 Attendance
In a group activity of this kind, poor attendance disrupts the achievement and learning of other students and is
not what would be expected of a professional Engineer in the workplace. Because of this, attendance in
EG2017 will be monitored using the electronic scanners. It is your responsibility to arrive on-time and scan in.
In response to student feedback in previous years, students arriving late may not be permitted to scan in. Poor
attendance will result in your tutor or the year tutor being notified in line with normal department processes,
and, as detailed in Section 5.8 below, may result in you losing marks for elements of the ‘group’ mark.
Of course, we realise there are genuine reasons why students are sometimes unable to attend a teaching
session – if this is the case you must use the department procedures to self-certify or submit a Mitigating
Circumstances form with accompanying evidence. It is your responsibility to do this, we will not chase you, but
we will offer all the support we can to help you catch up with anything you have missed.
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5.8 Assessment
Like design and labs, there is no opportunity to resit EG2017 Business Simulation in September so it must be
passed for you to progress at the end of your second year. Failure of this module will result in course
termination. In practice it is extremely unlikely that any student who attends and makes a positive
contribution to their team will fail this module but be warned: poor attendance and contribution puts you at
risk.
The weighting of each assessment is shown in the table below. Templates and hand-in arrangements for the
assessments will be posted on Blackboard.
Individual Assignment on Financial terms 25%

Business Strategy & Brand 10%
Y1 Results & Management report 15%
Y2 Results & Management report 15%
Business Simulation group mark
Y4 Results, Management report &
15%
Business Review
Group Learning Review 5%
Poster Presentation 15%
The individual assignment is, as it sounds, an individual assignment for which you will be awarded an individual
mark. The other activities are group assignments for which a group mark will be awarded on Blackboard.
In cases where there is a significant difference in effort and engagement between members of the group the
group mark may be adjusted via a contribution factor based on the criteria below. You will see the effect of
this contribution factor in the mark you receive via the Student Record System after the exam panel has
confirmed the marks.
1. Attendance contributing to specific assignments

You must demonstrate adequate attendance during each of the sessions associated with an assignment to be
awarded the group mark for each of the assignments indicated. The sessions that will be used to determine
contribution to each assignment are given in Appendix XI. If your attendance in the respective ‘block’ of
sessions is inadequate, you will lose the marks for the respective assignment. If you are unable to attend due
to illness or other mitigating circumstance, it is your responsibility to report this in line with normal Dept.
procedures.
2. Overall weighting factor and group effort survey

As part of the Group Learning Review you will be given the opportunity to submit a group effort survey that
can be used to reward team members who have put in more effort than average. This will be done on the basis
of a contribution factor of between 0.8 and 1.2 for each team member that be applied to the group mark.
3. Academic judgment
The module coordinator reserves the right to adjust the marks for group assessments awarded to individuals
based on academic judgment of the effort of individuals. We expect only to have to do this in extremely rare
cases.
6 BUSINESS SIMULATION PARAMETERS

There are around 175 students taking part in the simulation event and you will be allocated to a team of up to
six people. Your company will be competing against a number of other companies in your simulation World
and against background market competition. We have four different Worlds, each one named after a famous
engineer, namely:
World World Name

A Archimedes
G Gilbreth
M Maxwell
R Roebling
The simulation event will run for four trading periods, each trading period being a full financial year of
12 months (50 weeks). Your first year of trading will be from 1 October 2015.
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All costs will rise annually with inflation. A Cost & Data Sheet is provided for each year, which can be accessed
via the Reports Menu in the simulation (select Reports:View Current Reports:Current Cost & Data Sheet). The
Cost & Data sheet for the first year of trading is given in Appendix V.
The currency is £ sterling.
The answers to the most "Frequently Asked Questions" are provided in Appendix IX on page 40.
6.1 Market Dynamics

You are entering an automotive market where there is already a degree of background market competition
comprising the mainstream companies (Ford, GM, Renault, BMW, VW, Lexus, Mercedes, Nissan, Honda,
Toyota, Kia, Proton, Jaguar, Land Rover, Volvo, Peugeot, Saab, Fiat, Citroen, Rolls Royce, Bentley, etc). As the
simulation event progresses you will create a more competitive environment where the decisions of one
company are likely to affect the results of one or more of the ‘live’ competitors. This will require astute
decision making to ensure your financial and business success.
At the start of the simulation, the size of the market will be around 12 million new car sales and the market
environment will reflect the conditions at the start of the simulation activity. We have the capability to adjust
the market conditions as the simulation progresses and each World will encounter the same basic conditions.
However, the decisions of each team will affect the environment and each World will develop its own
competitive nature. The basic structure of the market at the start of the event is shown below. Over the four
years, you will compete for market share against the competition. Your business decisions will be impacted by
those of the other teams in your World and by a series of random events covering global market, team and
product issues. Each year, the simulation decides on the level and intensity of the background market
competition. It is likely that new entrants will enter the background market during the simulation event with
the most likely new entrants being from China or India.
It is important to remember that markets change over time, some more than others and the dynamics of the
European passenger automotive market are likely to be somewhat different by year 4 than they are today.
Please do not assume that today’s market conditions will prevail throughout the whole of the simulation
activity. Built into the simulation is a random-event generator that provides a real time dynamic and sets a
number of interesting and realistic business challenges.
6.2 The Starting Position

Your starting position is a greenfield site, no production facilities and no workforce.
You have £500 million in the bank raised from the issue of 5 million shares of £100 each. This is called the
shareholders equity investment. Additional capital investment is available on request but acceptance will
depend on the strength and integrity of your business strategy. The current economic environment in Europe
prevails.
In the first year of operation, two different models of car must be produced. A maximum of five models is
allowed but only one new model can be introduced each subsequent year and must be funded 12 months
prior to launch – full details are given on page 13.
6.3 The Financial and Economic Environment

The economic outlook for the whole of Europe is slowly improving but is still uncertain within many countries.
Austerity measures have eased but most of the major European Governments are still trying to reduce debt,
therefore, cuts are still being made in government spending and although consumer confidence is returning
there is still an element of caution throughout. Unemployment figures are, in general, falling in most
economies but levels are still high, especially amongst the young. There is optimism that economic growth
and the trend of lower unemployment will continue but progress is likely to be slow and there will continue to
be large cross country differences in the near future.
6.4 The Marketplace

The marketplace is the European Community and market research informs us that the car market is divided
statistically into the following platform sizes/types and age groups. The first objective is to identify the target
sector for each of your products. This is probably the most important decision to be made by the company as
it will be used as the basis for many other production and marketing decisions.
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The numbers given in the table below are used by the simulation software in the Company Reports/Annual
Results to indicate the sector in which you are operating. However, when making decisions in the simulation
you will enter the size car you intend to produce and the age group at which it is targeted. NB: Once selected,
the car size cannot be changed but it can be re-targeted at a different age group.
Car Size
Age Group City Medium Large Luxury
e.g. Mini e.g. Astra e.g. Audi A6 e.g. Jaguar XK8
Under 25 1 2 3 4
25 to 40 5 6 7 8
41 to 55 9 10 11 12
Over 55 13 14 15 16
At the start of the simulation the market spread between the sectors, expressed in % terms is shown in the
following table. Market research can be purchased annually that will provide a forecast of expected total
market sales (volume) and the changes to sales patterns per car size category.
Car Size
Age Group City Medium Large Luxury
e.g. Mini e.g. Astra e.g. Audi A6 e.g. Jaguar XK8
Under 25 9.95 6.50 1.80 0.20
25 to 40 8.40 13.75 5.60 1.45
41 to 55 7.65 11.80 6.30 1.55
Over 55 9.00 8.50 6.00 1.55
Total 35.00 40.55 19.70 4.75
The car sizes are categorised by selling price ranges (broad guidelines) as follows: City: up to £16,500; Medium:
£12,000-£28,000; Large: £20,000-£60,000; Luxury: £40,000 to over £100,000.
The market is undergoing a period of significant change and turmoil. In 2008 European car sales figures were
easily the worst for over a decade at 14.6million and gloomy forecasts for 2009 proved to be well founded
with the whole market falling yet again. There was some recovery at the start of 2010, mainly as a direct result
of Government incentives, the most successful being the scrappage schemes that were introduced in 2009 and
continued through part of 2010. However, once the schemes ended, the industry was left still suffering from
over capacity and a crowded marketplace, forcing several European companies to reduce their workforce and
production and enforce new working practices. The year finally ended with registrations falling to 13.8 million.
New product ranges and upgrades to established models stimulated growth in the first quarter of 2011 but
eventually registrations fell by 1.5% to 13.6 million (13.2m EU only) for the whole year. There was some
optimism as sales improved on 2010 figures in the stronger economies, with sales generally reflecting the
economic conditions within individual countries, but this optimism was short lived as 2012 saw a decline in
nearly all countries, with the overall market falling by 8.1% to 12.5 million (12m EU only). 2013 saw a further
1.6% fall to 12.3 million (11.9m EU only), the lowest level since 1995 and 25% below the 2007 peak. Of the
leading EU countries only the UK and Spain saw an increase in registrations – a significant 10.8% increase in the
UK and a more modest 3.3% in Spain. However, the last 4 months of 2013 saw the beginning of some growth,
although in absolute figures, the results were still very low in historic terms. Fortunately, the trend continued
into 2014 and the year ended with registrations of nearly 13 million (12.5m EU only), an upturn of 5.6% and
the first increase since 2007. Of the largest markets, Spain recorded the largest increase over the year (18.1%)
followed by the UK (+9.3%), Italy (+4.2%) and Germany (+2.9%), while France remained stable (+0.3%). The
growth in Italy and Spain is particularly encouraging as both economies have suffered severely throughout the
recent years of recession.
The beginning of 2015 has brought more optimism, with registrations rising by 8.6% in the first quarter
compared to the same period in 2014.
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Forecast
Forecasts for 2015 are cautious but most reports suggest that European car sales are likely to increase by 2-
3%. There is confidence that consumer confidence is gradually returning, particularly in the more successful
economies. However, tough economic conditions still prevail in parts of Europe and car makers also face the
problem that there is a shift away from driving among older Europeans and falling interest in car ownership
among the young, especially in regions of high youth unemployment. In addition, cars are now more durable
so consumers do not need to buy a new car as often unless by personal choice.
Recovery will depend on how quickly European markets emerge from the economic uncertainty of the last few
years and whether new products are good enough to attract new buyers and recapture old ones. Prior to the
crisis of 2008/9, the European car market experienced a period of strong growth with companies launching a
number of new models with the aim of enticing consumers into purchasing new vehicles. The success of the
Nissan Qashqai and the continuing popularity and sales growth of the BMW Mini proves that this can still be
achieved and the leading manufacturers continue to work on this premise. Recent additions to the market
include the new Fiat 500X, the Jaguar XE range and the Land Rover Discovery Sport, with a plethora of other
vehicles to be launched in summer and autumn 2015. Upgraded models include a hybrid VW Golf GTE, the
BMW 1 series, the Vauxhall Corsa VXR and the Citroen C4 - all launched with the intention of boosting sales
throughout Europe.
The recent fall in fuel prices is likely to take some pressure off larger models but there are still the higher
taxation levels to take into consideration. In addition, now that consumers have experienced long-term high
fuel costs it is likely that many will still err on the side of caution and continue to look for fuel efficient vehicles.
The sales of diesel engines may fall as a consequence of the new EU legislation designed to reduce nitrogen
dioxide levels/pollution which will see an increase in the cost of diesel fuel and higher taxation on diesel cars,
as well as increased parking charges for diesel cars that fall below the recommended emission levels.
Manufacturers have the opportunity to exploit this market by developing fuel-efficient vehicles, lower
emission diesel engines and engines powered by alternative fuels. It should also not be forgotten that when
times are difficult buyers will look for a safe option where reliability is assured, as is the case with VW and
BMW.
These factors show a way forward and there is optimism in the market but it is expected that 2007 levels will
not be achieved until at least 2018.
It is into this environment that you are coming to market. As they say… interesting times make for interesting
learning experiences. Enjoy!
6.5 Product Design and Options

Design features, including body shape and engine size need to be chosen and value added options can be
selected available for purchasers to add to the basic car. In addition, research and development projects can
be run to increase the model's perceived value.
The cost of model designs, options available and research and development are listed on the Cost and Data
Sheet.
Every car produced will be built with at least one of the body designs offered combined with one of the engine
sizes/types offered. The percentage "take up" of each shape and engine size will depend on their popularity
and the additional cost will vary accordingly (For cost calculation purposes use an average of the cost of the
designs offered plus an average of the engine sizes offered). You are able to offer multi design and engine
options on each of your products where this is deemed to be an appropriate offering. Remember that giving
the customer a wider choice of products will add complexity to your supply chain and manufacturing but will
attract more buyers.
Not all cars will be built and sold with all the options offered, only those chosen by each individual customer,
and some cars leave the factory without any additional options at all. The proportion added will depend on
the popularity and appropriateness of the options offered. Therefore, the cost of including options per car
will only be a percentage of the total. The simulation uses a complex model to determine the popularity of
the model in each trading period but for cost calculation purposes, an average of a 33% uptake can be used.
Page 11
Option Packages
Some of the customer choice options are available in the form of packages. The content of these packages is
shown below.
Driver Assist Safety Park assist, lane departure warning system, adaptive cruise control with speed
Pack limiter, blind spot information, flat tyre indicator, keyless entry.
Heated front seats, power wash headlamps, heated front windscreen and washer
Winter Pack nozzles, low washer fluid warning light. Luxury models also include dynamic fog
lights and electrically heated and adjusted door mirrors.
Leather upholstery, privacy glass, heated seats, electrically foldable and heated
Luxury Styling Pack door mirrors, alloy wheels, advanced navigation system, built-in bluetooth/USB
connection, front fog lamp, keyless entry.
6.6 Research and Development

Research and development investment is an important part of your business decisions. Investment in research
and development will increase the model's value in the long-term when projects succeed. However, both time
and money must be spent on each project and it is possible that they will fail. There are five 'failsafe' projects
that are guaranteed to be successful :
1. Product Relaunch
2. Facelift
10. Fuel Efficient Engine
21. Low Emissions
27. Improved Build Quality
If a project does fail it is possible to re-invest and begin again or accept that the investment is lost.
R&D projects are divided into two phases :
Phase 1: The research phase which is concerned with the initial work in preparing the project. This is
likely to include matters like customer and technical research, prototype development and
testing in a laboratory.
Phase 2 The development phase which is concerned with taking the prototype work and developing
it for production. This is likely to include design engineering, application, material selection
and tooling for manufacturing.
Details of the times needed for each phase for individual projects is given in Appendix V. At the end of each
year an R&D report will be provided that gives the year that the project is expected to come online (or
whether it has failed). You have the option to stop any research and development project at any time before it
is available (online) – the money you have spent will be considered as a loss and written off.
Once online for one model, the new technology can then be applied to other products without the need for
the research phase to be repeated, with the exception of the following model specific projects for which both
the research and development phases must be carried out for every model :
1. Product Relaunch
2. Facelift
27. Improved Quality Build
For all other projects, once the research phase is complete, to add it to other models select the project on the
relevant R&D decision screen. The project will then come online on the additional vehicles once the
development time is complete, however, please note that it is still possible that it will fail for one or more of
the other models.
NB : Until the project is online, the box must be checked for it to continue, if unchecked the project will be
stopped and the money already invested lost.
Research and Development costs on the Profit and Loss Statement also include 50% of any investment in a
new model (see the section on Production/New Models on page 13).
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6.7 Pricing and Profit Margins
The simulation works on the basis of a single market price for the car. It does not provide for incremental
pricing depending on the number of different options that are selected by the customer. The single selling
price must be set taking into account the designs and options you have chosen to offer and the market at
which the model is targeted. We have set the initial pricing parameters broadly in line with those that are
available in the market today. However, remember that we are creating a competitive environment and this is
likely to have a bearing on your pricing policy. You need good judgement when thinking about the pricing and
market positioning of your products.
6.8 Production
Factories
Factories are required to house the workforce and production lines. One factory has been purchased at a cost
of £650m. This amount includes the initial investment for your first two models.
Each factory has the capacity for 4,000 workers, comprising both production and management employees and
unlimited amounts of automation. The number of factories depends on the total number of employees, for
example, if between 4,001 and 8,000 people are employed, they will be accommodated in two factories.
Should it be necessary to decrease the staff down to 4,000 or below, the second, and any further factories, will
be sold by the simulation. Factories are bought and sold automatically depending on the total size of the
workforce. Any number of cars may be produced in a factory.
If a factory is sold, it will only realise 60% of its book value. The oldest factory is the first to be sold. The cost
of new factories increases each year with inflation. You can open as many factories as you wish, provided you
have the appropriate funding available.
Output
The number of each model to be built will depend on the workforce put on the model, productivity for the
model size and automation investment. Productivity varies depending on the size of the model and
automation investment and is given as cars/worker/year:
City cars: 44
Medium cars: 42
Large cars: 41
Luxury cars: 9
A productivity target must be set for each model. Low targets may allow time for improved build quality whilst
high targets may require overtime but can affect product quality. The target set will be the maximum amount
of cars produced in the year.
Productivity can be improved by investing in automation, paying better wages and investing in training.
Automation
Automation can be introduced and purchased in units of £500,000 (rising with inflation-cost given on the Cost
& Data Sheet). Each unit is as productive as 8 workers, e.g. 3,000 workers + £500,000 of automation will give
the equivalent of 3,008 workers. Each unit of automation requires manning to be effective – one man per
unit.
Automation must be assigned to the specific models as a percentage of the total available. This allows some
models to be highly automated whilst leaving others to be predominantly hand built.
To keep the automation fully effective it must be properly maintained, which costs approximately 10% of the
original investment per year. The investment is optional and must be entered in the automation decision box.
New Models
Two models are produced in the first year and there are no upfront investment costs associated with these,
just the production costs as specified by you. In subsequent years it is possible to launch additional models –
one per year up to a maximum of five, and financial investment is needed for these. The investment must be
made the year before production commences. Decisions relating to the new model are made during the
following year/round of the simulation, e.g. invest in year 1, launch model/make decisions in year 2.
Page 13
The average investment needed for a new model is £320 million in year 1 but half to twice this figure is
acceptable. However, the amount invested will have an impact on the degree of success of the new model.
The investment is divided equally between R&D for the model and on tooling up for production, which is then
considered to be an asset. This is reflected in the financial statements where 50% is found in R&D on the P&L
account and 50% is taken out of the cash flow. The latter is then added to the assets on the Balance Sheet and
depreciated by 10% annually.
Once a decision has been made to launch a new model the project cannot be stopped but the launch can be
delayed by allocating the minimum 100 workers to the model. The model specification will still have to be
made as the workers will be producing a limited number of prototypes and pre-launch products for
demonstration purposes.
6.9 Personnel
Wages
The workforce must be paid. There is an industry-wide minimum in force (the amount is shown on the Cost &
Data Sheet). It is not possible to pay less than this amount, the average paid is given on the decision entry
screen and the Cost & Data Sheet.
Redundancy payment is 12 weeks salary.
Workforce
The workforce may be moved from production of one model to another without incurring problems. If
employees are laid off, redundancy payments will have to be paid and bad industrial relations may develop. It
is not possible to reduce the workforce for any one model below 100, these workers will be producing parts
for servicing the cars already on the road and providing warranty cover for cars that are returned to the
factory for repair.
A working year is 50 weeks.

An acceptable rate of absenteeism is 4 days per year.
Training
Investing in training the workforce will improve their skills and subsequently product quality and productivity.
Management training improves industrial relations. An average training budget is 2% of the wage bill.
6.10 Advertising/Promotion
The products can be promoted in the marketplace in the following ways:
 Television
 Promotional Offers
 Radio
 Dealer Incentives
 Magazines/Newspapers
 Sponsorship
 Internet
It is important to choose the areas that will be most effective in relation to the target market. Further details
about the effectiveness of promotion can be found in Appendix VI.
Page 14
Cost of Advertising
There is a cost per unit set within the simulation for each method of advertising. These are guide figures and
do not indicate minimum costs, investing less will still have some effect within the marketplace and spending
more will increase customer awareness and sales. However, there is a saturation point and investing more
than twice the unit cost will have a negligible or zero effect. The unit costs are as follows :
Type of Promotion Cost per unit (£m)

Television 14.00
Radio 6.00
Magazines/Newspapers 11.00
Internet 4.00
Dealer Incentives 85.00
Promotional Offers 70.00
Sponsorship 65.00
6.11 Market and Competition Research

It is possible to purchase research information on the market and also acquire data on the competition as
follows.
Market Research
Invest in general market research that is generated by the computer. The market research comprises market
predictions, an investments sheet and expenditure by other teams.
Data on Competition
Invest in a data on competition report, which provides details of all products in the marketplace, their pricing
and sales performance and information relating to more general business and financial performance.
6.12 Finance
To support the funding of this enterprise the £500m of shareholders equity investment will be insufficient,
particularly when the following costs are taken into consideration:
factory/tooling: £650 million

automation: £0.5m per unit
market research: £5 million (computer generated)
data on competition: £10 million (computer generated detailed data)
wages: minimum £309, average £475 per week
raw materials, designs and options, research & development costs - see separate Cost and Data Sheet
(Appendix V) for these details.
Funding
To support the funding of this enterprise you have an existing capital base comprising of shareholder equity
and term debt finance.
Extra funding can be raised by borrowing money from the bank.
Bank Loan
To cover any cash shortfall, there is the option to take a standard loan from the bank. Additional funding may
be available from other sources under certain circumstances.
In the event of the cash balance at year-end being negative, an overdraft will automatically be granted but at a
punitive rate of interest.
Interest on loans will be charged as follows :
negotiated loan : 5 + inflation

overdraft : 8 + inflation (minimum 15%)
Loan Repayment
A negotiated loan is paid off automatically as long as the bank balance is in credit - 50% of the cash balance at
the end of each year will be used to pay off the outstanding debts.
Page 15
An overdraft is paid off when the bank balance rises above zero. It should be noted that overdrafts are fully
repayable on demand and are not considered to be a part of core business funding.
Investment
Bank Account
Interest rate on balances in credit : 1.5 + inflation
Organisational Overheads
All organizations have overheads. Such expenses cover management costs and expenses, administration,
communications, IT, HR, financial and legal management and all the other costs associated with the day to day
running of a business. In the simulation, overheads are calculated using the following formula :
10% x wage bill +

7½% x materials used +
5% x opening book value of fixed assets
Tax
Corporation Tax is charged at 22% of pre-tax profit.
Payment Periods
You must set the number of days that you give customers to pay after an order has been placed and the
number of days that you will wait before paying suppliers after purchasing materials. Giving customers a long
credit period will appeal to buyers, delaying too long before paying your bills will cause suppliers to raise their
prices by up to 5%.
Average days are:

Customers : 30-50 days; Suppliers : 60-75 days
Assets
Fixed assets are factories, automation and 50% of any investment in a new model launch. All will depreciate at
10% of their book value per annum.
Stock assets are valued at materials plus the amount spent on wages to produce the cars left in stock. It will
cost 15% of each car's production cost to keep them up to specification.
FINALLY …
Executive will provide you with a very dynamic learning experience. Each team will develop uniquely, based
upon how it interacts competitively, what products are introduced, and how these products are supported.
The economy will have its ups and downs, customer needs will evolve, and competition will intensify. A well-
planned strategy is essential.
Page 16
APPENDIX I - THE EXECUTIVE BUSINESS SIMULATION - MANAGEMENT TEAM ROLES
CHIEF EXECUTIVE OFFICER
Purpose of Job
To deliver shareholder value and ensure compliance with accepted standards of corporate governance
Key Tasks
 Formulation of company strategy
 Presentation of Annual Report to shareholders and investors
 Recommendation of investment proposals and plans
 Effective management of the Executive Management Board
 Approval of company marketing and promotional programmes
 Approval of capital plans up to a maximum annual investment of 5% of annual turnover
 Ensure complete compliance with bank requirements and demands
Performance Indicators
 Delivery of increased shareholder value year on year
 Achievement of the annual profit and cash plan
 Timely presentation of the annual and city/investor report
 Annual reduction in the cost
 Achievement of gross margin target on all product lines
STRATEGIC PLANNING EXECUTIVE
Purpose of Job
To ensure that the company's strategic plan is developed and implemented to achieve the agreed business
goals and objectives
Key Tasks
 Work with the CEO and other Executives to create the strategic plan for the company
 To monitor the activities of the firm’s marketplace and identify market and competitor trends
 To recommend changes to the strategic plan in the light of these trends
 To prepare an annual report for the CEO and the Non-Executive Board on the firm’s strategic
achievements and capabilities
 Alignment of company activities to meet the needs of the strategic plan
 Delivery of Annual Report for CEO and Non Executive Board
 Achievement of end position to ensure the continued growth and development of the firm
MANUFACTURING EXECUTIVE
Purpose of Job
To deliver the annual production plan to budget and quality targets
Key Tasks
 Preparation of the annual manufacturing resource and output plan
 Development of the training skills plan
 Setting and managing the finished stock policy
 Preparation of capital plans for automation
 Achievement of optimum productivity performance indicators
 Stock levels in accordance with the annual/strategic plan
 Annual reduction in the cost of warranty claims
 Achievement of gross margin target on all product lines
Page 17
FINANCE EXECUTIVE
Purpose of Job
To ensure that the company achieves its key financial performance indicators and stays within its borrowing
limits
Key Tasks
 Preparation of the annual budget plan
 Presentation of the annual financial statement
 Evaluating capital plans and requests from manufacturing and engineering departments
 Compliance with established practices and protocols in corporate financial management
 Effectiveness of the IT and business planning systems
 Achievement of the annual financial plan
 Effective management of the cash and borrowings policy
 Timely presentation of the financial report to investors and the Board
 Financial capability of all Executive managers
TECHNICAL AND ENGINEERING EXECUTIVE
Purpose of Job
To ensure that all products are specified correctly and that new design ideas are introduced to manufacturing
in accordance with best practice
Key Tasks
 Preparation of the technical specification for each vehicle product
 Assessment of new trends in vehicle engineering concepts
 Quality of supplied parts and components
 Clarity of understanding with manufacturing and marketing about new product introductions
 Engineering performance
 Technical excellence of product design and engineering
 Use of cross platform technology
 Annual reduction in the cost of warranty claims (in association with manufacturing)
 Value engineering, cost down projects
SALES AND DEALER NETWORK EXECUTIVE
Purpose of Job
To set and achieve the annual sales budget in both volumes and value of product sold
Key Tasks
Preparation of the annual product sales plan
Company sales pricing strategy and policy
Development of the dealer network
Setting and managing the finished stock policy (in association with the Manufacturing Manager)
Initiation of sales promotions and campaigns
Delivery of sales targets
Quality and effectiveness of sales promotion campaigns
New product ideas
Sales profit margins (price responsibility)
Page 18
HUMAN RESOURCE EXECUTIVE
Purpose of Job
To establish, implement and manage the company's HR strategy and policy
Key Tasks
 Establishment of the HR policies
 Development of the annual training programme
 Setting of the annual wage rates for all grades
 Management of the company's redundancy and employee benefit schemes
 Represent company on Government HR Task Force (when required)
 Review of Executive performance
 Productivity performance
 Employee absence levels
 Effectiveness of training programmes
 Days lost through undue industrial unrest
 Effectiveness of Executive Board
MARKETING EXECUTIVE
Purpose of Job
To prepare and deliver the company's marketing and brand development strategy and plan
Key Tasks
 Preparation of the product marketing plans
 Formulation of the media and advertising strategy and plan
 Development of the brand strategy
 Gathering of market intelligence to inform the product development programme for existing and new
products
 Delivery of the marketing plan to budget
 Protection of the brand image of the company
 News and Media PR responses
 Preparation of recommendations for upgrades of existing and new products introductions
Page 19
APPENDIX II – DECISION FORM
Exercise Name Team Number Round/Year
Company Name
(maximum 25 characters)
Model 1 Model 2 Model 3 Model 4 Model 5
Name (maximum 8 characters)
Model Size
Target Age Group
Designs Offered (1-10)

(as many as required)
Remove Designs (1-10)

Options Offered (1-30)

Remove Options (1-30)

R&D Projects in Progress

(1-27) (as many as required)
Cancel R&D Projects

(1-27) (as many as required)
Retail Price (£)
Workforce
Target Production
Automation Allocation
(must add up to 100% over all models)
Automation (£m) Skills Training £m

(maintenance + new)
Wage (£/week) Management Training £m
Promotional Expenditure (£m)

Television
Radio
Magazines/Newspapers
Internet
Dealer Incentives
Promotional Offers
Sponsorship
Page 20
Decision form page 2
New Model Investment (£m)
Market Research : Yes / No*
Data on Competition : Yes / No*
New Loan (£m)
Days for Customers to Pay (0-99) (Number of days given for customers to pay)
Days to Pay Suppliers (0-99) (Number of days waited before paying suppliers)
* Delete as applicable.
Page 21
APPENDIX III - ANNUAL MANAGEMENT REPORT TEMPLATE
World
Team Number
Name
Company Trading Year
Name No
A: Business Results
Business Forecast for
Current Year Previous Year
Next Year
No of Employees
Units Sold (No.)
Sales Value £
Gross Profit £
Operating Profit £
Cash at Bank £
Outstanding Loan £
Value of Unsold Stock at
Year End £
B: Key Financial Ratios

Current Year Previous Year Forecast for Next Year
Gross Profit Margin %
Sales Margin %
Return on Shareholders
Funds %
Return on Capital
Employed %
Current Ratio
Return on Assets %
C: Commentaries
Current Business
Performance
Future Business
Challenges
Business priorities for the

next trading period
Page 22
APPENDIX IV - KEY PERFORMANCE INDICATORS
Select your KPIs from this list
Financial Indicators
Bank Balance £
Return on Shareholders Funds %

Return on Capital Employed %
Return on Assets %
Gross Margin %
Sales Margin %
Current Ratio (to)

Gearing Ratio (to)
Liquidity Ratio (to)
Market Indicators
Sales Volumes pa
Sales Value pa
Market Share (total)
Market Share (per market sector)
Productivity Indicators
Output per Person pa (cars/employee pa

Sales per Employee
Profit per Employee
Training £ per Employee
Days Lost to Strikes
Page 23
APPENDIX V - COST AND DATA SHEET FOR ROUND 1 AND R&D DETAILS
Model Costs (£)

Model Size Raw Material Costs £ Selling Price of Basic Car £
City 6600.00 8050.00
Medium 9000.00 12150.00
Large 13150.00 15500.00
Luxury 26550.00 42000.00
Cost of Options (£)

Option City Medium Large Luxury
1 : Extended Warranty/Servicing 400.00 520.00 660.00 1400.00
2 : Electric/Memory Front Seats 450.00 585.00 742.50 1575.00
3 : SatNav/Entertainment Screen 750.00 975.00 1237.50 2625.00
4 : Adaptive Xenon Headlights 450.00 585.00 742.50 1575.00
5 : Upgraded Alloy Wheels 260.00 338.00 429.00 910.00
6 : Anti-Theft System 250.00 325.00 412.50 875.00
7 : Electric Tow Bar 396.00 514.80 653.40 1386.00
8 : Blind Spot Information System 200.00 260.00 330.00 700.00
9 : Automatic Transmission 875.00 1137.50 1443.75 3062.50
10 : Keyless Entry 276.00 358.80 455.40 966.00
11 : Sensors/Park Assist 220.00 286.00 363.00 770.00
12 : Rain Sensor/Auto Lights 75.00 97.50 123.75 262.50
13 : Lane Assist 265.00 344.50 437.25 927.50
14 : Sports Suspension 260.00 338.00 429.00 910.00
15 : Panoramic/Glass Sunroof 500.00 650.00 825.00 1750.00
16 : Heated Front Seats 176.00 228.80 290.40 616.00
17 : Full Size Spare Wheel 82.00 106.60 135.30 287.00
18 : Folding/Dimming Ext Mirrors 250.00 325.00 412.50 875.00
19 : Leather Upholstery/Finish 890.00 1157.00 1468.50 3115.00
20 : Privacy Glass/Sun Protect 180.00 234.00 297.00 630.00
21 : Controlled Air Conditioning 270.00 351.00 445.50 945.00
22 : Hi-Fi System/MP3 380.00 494.00 627.00 1330.00
23 : Enhanced Bluetooth/USB 200.00 260.00 330.00 700.00
24 : TV Function 550.00 715.00 907.50 1925.00
25 : Metallic Paint 375.00 487.50 618.75 1312.50
26 : Tyre Pressure Monitoring 135.00 175.50 222.75 472.50
27 : Rear View Camera 220.00 286.00 363.00 770.00
28 : Driver Assist Safety Pack 1100.00 1430.00 1815.00 3850.00
29 : Winter Pack 260.00 338.00 429.00 910.00
30 : Luxury Styling Pack 999.00 1298.70 1648.35 3496.50
Cost of Designs (£)

Design City Medium Large Luxury
1 : 2/4 Door Saloon/Estate 675.00 877.50 1113.75 2362.50
2 : 3/5 Door Hatch 600.00 780.00 990.00 2100.00
3 : 2/3 Door Coupe 725.00 942.50 1196.25 2537.50
4 : 4x4 975.00 1267.50 1608.75 3412.50
5 : SUV/MPV 1300.00 1690.00 2145.00 4550.00
6 : Convertible 1350.00 1755.00 2227.50 4725.00
7 : Small Petrol Engine 280.00 364.00 462.00 980.00
8 : Large Petrol Engine 500.00 650.00 825.00 1750.00
9 : Elecric/Hybrid Engine 1150.00 1495.00 1897.50 4025.00
10 : Diesel Engine 560.00 728.00 924.00 1960.00
Page 24
Cost of Research & Development (£m per annum)
Project Cost
1 : Product Relaunch 7.55
2 : Facelift 3.75
3 : Aerodynamic Remodelling 4.40
4 : Advanced Diesel Engine 6.25
5 : Alternative Fuels/Biofuels 6.50
6 : Fuel-Save StopStart System 3.65
7 : Accident Prevention System 5.50
8 : Anti-Theft/Tracking 1.55
9 : Energy Recovery/Re-Use 5.20
10 : Fuel Efficient Engine 4.15
11 : Breathalyser Interlock 3.15
12 : Lightweight Engine 6.25
13 : Better Elec Car Battery 6.30
14 : Wiperless Windscreen 4.00
15 : Self-Driving Car 7.15
16 : Zero Emissions Engine 6.45
17 : Remote Self-Parking 5.50
18 : Lightweight Ceramic Brakes 4.15
19 : Smart Noise Insulation 2.15
20 : Frost Free Windows 2.65
21 : Ultra Low Emissions 4.75
22 : Infra Red Night Vision 5.80
23 : Lightweight Car Body 7.00
24 : Car-2-Car-Communications 3.10
25 : 'Green' Painting Process 5.20
26 : Chameleon Car Colours 5.45
27 : Improved Build Quality 6.55
Miscellaneous Costs
Average Cost of New Model £m 320.00
Cost of New Factory £m 650.00
Unit Automation Cost £m 0.50
Cost of Market Research £m 5.00

Cost of Market Perception Report £m 5.00
Cost of Data on Competition 10.00
Average Market Wage (£ / week) 475.00

Minimum Wage Rate (£ / week) 309.00
Model Size Productivity (cars/worker/year)

City 44.00
Medium 42.00
Large 41.00
Luxury 9
Normal Absenteeism/Strike Level (days/worker/year) 4.00
Corporation Tax 22%
Page 25
RESEARCH AND DEVELOPMENT TIMES
PROJECT TIME PROJECT TIME
1 Product Relaunch 0+2 15 Self-Driving Car 3+2
2 Facelift 0+1 16 Zero Emissions Engine 5+1
3 Aerodynamic Remodelling 1+1 17 Remote Self-Parking 4+1
4 Advanced Diesel Engine 1+2 18 Lightweight Ceramic Brakes 2+1
5 Alternative Fuels/Biofuels 2+2 19 Smart Noise Insulation 1+1
6 Fuel-Save Stop Start System 1+2 20 Frost Free Windows 2+1
7 Accident Prevention System 2+1 21 Ultra Low Emissions 2+1
8 Anti-Theft/Tracking 1+1 22 Infra Red Night Vision 1+1
9 Energy Recovery/Re-Use 3+1 23 Lightweight Car Body 1+2
10 Fuel Efficient Engine 2+1 24 Car-2-Car Communications 3+1
11 Breathalyser Interlock 1+1 25 'Green' Painting Process 2+3
12 Lightweight Engine 2+2 26 Chameleon Car Colours 3+1
13 Better Electric Car Battery 3+1 27 Improved Build Quality 0+1
14 Wiperless Windscreen 1+2
TIME (in years) - the first figure is for Research, the second is for Development.
There are five projects that are guaranteed to succeed – they are shown in bold italics in the table above. All
other projects carry a risk of failure.
A project is firstly researched and then if successful moves to the development stage and ultimately becomes
online (or fails). For the project to continue the project box must be ticked on the decision screen – if at any
time it is "unchecked" the project will be cancelled.
Once the project is online for one car model it is possible to add it to other models if appropriate. To do this,
tick the relevant box on the decision screen for the additional model(s) and the development stage will begin.
This will then be charged for as per the Cost and Data Sheet until it becomes online or fails. The research stage
will not have to be repeated.
The exception is for projects 1, 2 and 27. For these projects both the research and development stages must
be undertaken for all models.
The status of all projects and the year they are expected to come online is provided on the Research and
Development Report in the Results drop down menu in the simulation.
Page 26
APPENDIX VI – MARKET RESEARCH ON PROMOTION/ADVERTISING
Methods of Promotion (Market Survey)
The Motor Industry is said to be the largest buyer of advertising in the world. Expenditure is high and therefore it is
important that it is used effectively. The following information summarises April Training's findings on the effects of
various forms of promotional advertising on the purchase decisions of a cross-section of car buyers.
Television is expensive but extremely effective and has the most noticeable overall effect throughout all age groups
and all car markets.
As well as the home TV, television includes the use of large screens at large sporting occasions or music arenas, e.g.
football and rugby games. VW, Renault and Fiat are among 7 auto brands that have recently purchased advertising time
at major football games in Italy – displaying the ads during the 15 minute break as well as before and after the game.
Ford used the UEFA Champions League soccer final to launch a pan-European advertising campaign in summer 2013.
Dealer incentives have a high cost, e.g. it is reported that, for a three-month period, VW offered its dealers €928 for
each used car that was traded in for a new Golf V. However, this method of promotion can be very successful,
particularly when targeted at the over 40s where the effect is marked. The exception is the lower response in the
luxury market.
Local radio advertising is particularly effective when targeted at the younger age group, although specialist stations
now cater for a wider age and social grouping range, which is increasingly allowing this medium to reach a very large
audience. The audience size has also increased with the advent of digital radio, not only providing an improved
service but also giving access via the internet, digital TV and mobile phones and approximately eight car
manufacturers within the top 20 spend on radio advertising. It has been a growth area in recent years but may be
about to stabilize,
Magazines/Newspapers are effective for all car sectors but it is usually the over 30s that will take the time to read
reviews. There is a risk element involved as a bad article can have a negative impact.
Promotional Offers are very effective in all age groups, although less so for the over 55s. Historically, promotional
offers were made late in a model's lifecycle to maintain sales levels. However, with increasing competitiveness in the
marketplace, more companies are offering inducements from the outset, e.g. Vauxhall and Toyota are both 0% finance
and 12 months free insurance (associated with taking out finance) on certain models, Peugeot is offering a 3 year
finance package that includes insurance, road tax, servicing and roadside assistance and low cost leasing options are
commonplace. End of year sales are also becoming popular to clear stock and boost profits.
Digital Media (for the purposes of the simulation this includes internet, social media, tablet, Smart mobile phones,
video and SMS advertising). It is the fastest growing form of media for advertising. It was initially aimed at younger
buyers in higher income brackets but as use of the internet spreads so does its use by wider age and income groups;
the increase in the percentage of "silver surfers" is particularly notable. Digital media advertising consists of paid
search engines (e.g. google ads), banners and pop-ups on websites, displays and posting on social media and email
sites, classified ads and audio and video streaming, for instance, Mercedes, Jaguar and BMW have made short
advertising films, starring high profile actors/singers, for the internet, targeting first time luxury buyers. With the
domination of Smart phones in the mobile phone market and the success of the tablet market, the access to websites
and the use of social media has grown rapidly and with it the power of the internet, making it poised to become one
of the largest forms of media for automotive advertising.
Research has also been carried out to identify the types of website that are visited by owners of each car brand. This
information is intended to help car manufacturers target advertising on the most relevant sites as well as on their own
websites, e.g. it emerged that Ford owners have a preference for travel and finance sites, while Vauxhall owners
choose sites related to the automotive sector, such as Direct Line Insurance and Halfords. Internet review centres now
also encompass the auto industry and are another tool to be used when customers decide which car they will
purchase.
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The use of SMS/texting is less significant but it does have a place in marketing budgets. In 2005 DaimerChrysler's
SMART became the first manufacturer in the UK to use SMS responses to a TV advertisement, allowing viewers to
arrange test drives, request brochures or locate dealers by sending a text message from their mobile phones. Land
Rover followed shortly afterwards when it launched an electronic game called Range Rover Sport Tourer, available as a
download from UK mobile phone networks.
Sponsorship will only be noticed by those interested in the events concerned. In the past this was usually restricted to
motor sport events, being most effective when a major championship was won. Although this continues to be a major
element in brand sponsorship, car manufacturers are now beginning to sponsor other events to widen the audience,
e.g. TV and radio programmes; in the past few years, Audi has sponsored a major tennis tournament, Jaguar a tennis
star, Mercedes-Benz a Giorgio Armani exhibition, Volkswagen has been a partner for the Berlin International Festival
since 2003 and Fiat was the official Sponsor of European Rugby Cup in 2005, as well as launching an exclusive shoe
collection in collaboration with a leading Italian shoe designer. Celebrity endorsement is also growing as a popular
form of marketing.
However, sponsorship is also an area when companies feel they can save money in times when profits are under
pressure, as an example, for budget reasons only, PSA pulled out of the World Rally Championship after 2005, despite
having taken five Manufacturers titles and three Drivers titles in five consecutive years and Honda pulled out of F1 in
2009.
In conclusion, it is our opinion that manufacturers concentrating on the under 25 age group should consider television,
promotional offers, digital media, radio advertising and to some extent sponsorship as the most cost-effective options,
the 25-40 year olds should be targeted via television, digital media, promotional offers and, to a lesser extent, radio.
Between the ages of 41-55, television advertising, dealer incentives, promotional offers and magazines/newspapers
appear to be the most effect media and, finally, the older age groups (55+) respond best to television advertising,
magazines/newspapers, dealer incentives and promotional offers.
EXPENDITURE ON PROMOTION
Advertising expenditure by the major motor manufacturing companies in the UK ranges from £200 to £1,000 per car
sold, a total of £10-£100 million per year per company and in 2012 the total amount spent by European car
manufacturers was 8.96bn Euros. In 2013 the leading companies spent between £21m and £47m advertising in the
UK alone. Prestige marques such as BMW and Mercedes can spend less than the average, probably because their
enviable reputations sell the products without advertising. The figures given include spending on direct mail, cinema
and billboard marketing as well as the categories listed previously. Marketing budgets are usually based on a
percentage of total sales revenue and can vary from 1-14%, with the majority spending between 3% and 5%. There
does seem to be a correlation between sales and higher investment in promotion and those that spend more than
10% seem to reap the rewards.
Out of the total budget, most of the companies currently spend approximately 30-40% on television advertising. The
second highest expenditure has traditionally been on promotional offers and dealer incentives, with Daewoo, Chrysler
Jeep and Hyundai spend more of their budget on press coverage than TV. Magazines and newspapers also attract a
big proportion of the budget. However, the big shift is towards investment in digital media marketing, particularly via
social media, Smart phones and tablets. Over the last 3 years the budget split between traditional and online forms of
advertising has moved from 95/5% to as much as 55/45% respectively (maximum figures). In 2014 expenditure on
digital media advertising rose above 30% of the total budget in some cases and it is predicted that this could rise to
50% over the next few years. Currently, this is at the expense of investment in newspaper and magazine media but it
is thought that it could also affect TV in the future.
In general, investment in advertising has shifted from traditional to more direct forms of promotion aimed at the
customer, for example, discounts or added value options as free extras. In the current economic climate, investment
in promotion is seen as key to improving sales in a market that is only just beginning to recover from economic crisis.
Overall car manufacturers have increased their European marketing budgets year on year since the recession started
in 2009 (the exception was in 2010 when the industry reduced spending by an average of 16%, with newspapers and
television being the hardest hit areas), a pattern that is set to continue in the near future.
Page 28
Effects of Promotion
The figures in the tables represent the effectiveness of each type of advertising for each category, ranging from 0 to
10.
Television
City Medium Large Luxury
Under 25 9 6 3 2
25 to 40 7 8 6.5 2
41 to 55 3 7 5 0.5
Over 55 7 6 5 0.5
Radio
Under 25 7.5 5 3 1
25 to 40 4 4 2 0.8
41 to 55 3 3 1.5 0.8
Over 55 1 1 0.5 0.1
Magazines/Newspapers
Under 25 2 2 3 1.5
25 to 40 4 4.5 3.5 2
41 to 55 5 5 5.5 2
Over 55 5 5 6 2
Internet
Under 25 8.5 8 6 1
25 to 40 8 8 6.5 1.5
41 to 55 3.5 4 3.5 1.5
Over 55 2 2 1 1
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Dealer Incentives
Under 25 5 5 2 0.2
25 to 40 6 6 3 0.7
41 to 55 7 8 8 0.7
Over 55 3 7 7 0.5
Promotional Offers
Under 25 10 8 6 1
25 to 40 7.5 7 6 1
41 to 55 4 6 6 2.5
Over 55 4 5 5 2.5
Sponsorship
Under 25 6 6 2 0.4
25 to 40 6 2 2.5 0
41 to 55 2 2 1 0
Over 55 0.4 0.4 0.4 1
Page 30
APPENDIX VII - TYPICAL MANAGEMENT AND FINANCIAL REPORT
Production and Sales Report
Section 1: Model Production and Sales

Market Model Price Market
Model Name Produced Sold In Stock
Sector £ Share %
10 S40 1.8lt 4 dr 91650 91562 88 17550.00 1.53
14 XC90 3lt SE 79950 79950 0 20425.00 1.33
Section 2: Model Resource and Cost Summary

Design & Gross
Market Materials Labour
Model Name Workforce Options Margin Productivity
Sector Costs £ Cost £
Cost £ %
10 S40 1.8lt 4dr 2150 9784.69 4457.49 492.64 16.04 42.63
14 XC90 3ltr SE 1850 9784.69 6507.97 485.93 17.85 43.22
Section 3: Productivity Report

Target Potential Potential Warranty
Market
Model Name Production Productivity Productivity Cost
Sector
Cars/Worker/Year With O/time per Car £
10 S40 1.8ltr 4 dr 91650 44.44 53.33 284.84
14 XC90 3 ltr SE 79950 45.00 54.00 325.85
Total Workforce 4000

No of days lost to strikes 4
Overall Productivity (cars/worker/year) 42.90
Productivity Index 1.10
Section 4: Market Distribution Analysis

Total Market (m) City Medium Large Luxury
No of Units 5.59 6.00 2.94 0.78
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Profit and Loss Account £m
Sales 3239.89
Cost of Sales* 2690.60
Gross Profit (Loss) 549.30
Overheads
Fixed Overheads 240.89
Stock Upkeep Cost
Product Recall Cost
Promotion 55.00
Research and Development 176.85
Professional Charges 15.00
Warranty Claims 52.13
Training Cost 4.00
Extraordinary Events
Loan Capital (Set Up Fee)
Depreciation 82.00
Operating Profit (Loss) -76.58
Interest on Current Account

Interest on Loans 18.04
Cost of Redundancies
Factory Sale Loss
Pre Tax Profit (Loss) -94.62

Tax
Post Tax Profit (Loss) -94.62
*Cost of Sales Breakdown
Opening Stock 0.00

plus Materials Costs 2607.89
plus Wages 84.00
Minus Closing Stock 1.30
Cost of Sales 2690.60
Page 32
Cash Flow £ m
Opening Bank Balance 500.00

Revenue 2973.60
Corporate Subsidy
Government Subsidy
Insurance Claim
Factory Sale Income
Bank Interest
Extraordinary Events
Material Costs 2214.92

Wage Costs 84.00
Total Overheads 543.87
Factory Cost 650.00
Redundancy Costs
Automation Expenditure 20.00
Loan Repayments
Tax Payments
Bank Interest 18.04
New Model Production Costs 150.00
Balance Before Loan -207.24

New Loan 250.00
Closing Bank Balance 42.76
Page 33
Balance Sheet £ m
Fixed Assets
Cost 820.00
Depreciation -82.00
Book Value of Fixed Assets 738.00
External Investments
Investment Value
Current Assets
Stock Value 1.30
Debtors 266.29
Bank Balance 42.76
Current Liabilities
Tax 0.00
Creditors 392.97
Overdraft
Net Current Assets (or Liabilities) -82.62
Total Assets Less Current Liabilities 655.38
Capital and Reserves

Share Equity 500.00
Retained Profit (Loss) -94.62
Total Subsidies
Total Shareholders Funds 405.38
Long Term Liabilities

Loan 250.00
Total Capital Employed 655.38
Page 34
Financial Indicators
Outstanding Debt £m 250.00
Return on Assets % -14.44
Current Ratio 0.79
Gross Margin % 16.95
Quick Ratio 0.79
Post Tax Profit / Sales % -2.92
Liquidity Ratio 0.11
Profit / Employee £ -23656.17
Recent Industry News

Sales of new cars have fallen across Europe as a result of the changed financial market and European economic
conditions. It is expected that manufacturers will need to enhance their customer promotion programmes to
improve sales levels in the next 2 years.
The EU has confirmed its intention to proceed with the implementation of legislation that will make it a legal
requirement for all passenger and light commercial vehicles to meet new and more stringent carbon emissions
requirements by 2015. All manufacturers will be required to make significant investment in their emissions research
and development budgets to meet these new and more challenging demands.
Market Predictions and Information

The European Automotive Market Research Co has made the following predictions for the European passenger
car market. Overall, the market will rise from 11.5m to 12.7m cars sold. The City car market is expected to grow by around
14%. The Medium car market is expected to grow by around 8%. The Large car market is expected to grow by around 6%. The
Luxury car market is expected to grow by around 12%. Inflation this year was 1.28% and is expected to be around 1% next
year.
Summary of Decisions Entered
Designs Available
Model 1 Model 2
Design
S40 1.8ltr 4 dr XC90 3ltr SE
2/4 Door Saloon/Estate Yes
3/5 Door Hatch Yes
SUV/MPV Yes
Small Petrol Engine Yes Yes
Electric/Hybrid Engine Yes
Diesel Engine Yes Yes
Page 35
Options Available
Model 1 Model 2
Option
S40 1.8ltr 4dr XC90 3 ltr SE
Extended Warranty/Servicing Yes Yes
SatNav/Entertainment Screen Yes
Upgraded Alloy Wheels Yes
Automatic Transmission Yes
Sensors/Park Assist Yes Yes
Rain Sensor/Auto Lights Yes
Lane Assist Yes
Full Size Spare Wheel Yes Yes
Folding/Dimming Ext Mirrors Yes
Privacy Glass/Sun Protect Yes
Controlled Air Conditioning Yes Yes
Hi-Fi System/MP3 Yes
Metallic Paint Yes Yes
Driver Assist Safety Pack Yes Yes
Winter Pack Yes
Luxury Styling Pack Yes
Research and Development Projects (Estimated year of completion)

Project S40 1.8ltr 4dr XC90 3 ltr SE
Alternative Fuels/Biofuels 4
Accident Prevention System 3
Fuel Efficient Engine 3
Driverless Car 5
Frost Free Windows 3
Ultra Low Emissions 3
Promotion Spend £m
Total Spend
Media
£m
Television 23.00
Radio 0.50
Magazines/Newspapers 4.75
Internet 1.45
Dealer Incentives 19.00
Promotional offers 6.3
Sponsorship 0.00
Total Spend 55.00
Workforce, Wages and Automation Expenditure

R&D Expenditure
No of Wages Paid Automation Spend Automation Spend
(excluding new model
Employees (pp/week) CY Cumulative
investment)
4000 £460 £20m £20m £176.85m
Payment Periods
Customer Days to Pay 30 days
Days to Pay Suppliers 55 days
Page 36
APPENDIX VIII - INSTRUCTIONS FOR USING EXECUTIVE IN THE BUSINESS SIMULATION EVENT
Introduction
Using the Executive simulation is extremely easy and we are extremely confident that once you have been able to
access your team files a couple of times you will become very comfortable in its use. It is run online and contains a
number of control features that make sure that your decisions remain within quite a wide range of parameters.
It is important to remember that the software is primarily a communication tool that enables you to submit your
decisions for processing in an easy and efficient manner. The use of the simulation should not detract from the
crucial strategy development and business planning that is key to the exercise.
Once the company's strategy and plan is in place, a set of decisions must be made. These decisions are then entered
into the Executive user screens. The software contains a powerful "what-if" business-modelling tool that enables you
to see the POTENTIAL impact of your decisions in a set of forecasted business results. Once decisions are entered, a
predicted outcome can be viewed and the decisions can then either be changed or saved for submission to the tutor.
It is strongly recommended that changes made to decisions to try to improve performance are managed carefully. If
too many changes are made at the same time it will not be possible to identify which one(s) have made an impact. It
is best to make as few changes as possible each time the "what-if" model is run.
Basic Parameters
1. There are 4 Worlds operating in the simulation and in each World are 8 unique teams. Each World has a
unique identity related to an engineering icon (see Appendix XI). In each World you will have your own
simulation file that is accessed using your unique password
2. Your game files are unique to you and cannot be accessed by any other team provided you do not disclose
your password to anyone outside of your team. We cannot be held responsible for any issues that arise
where you have shared your password and allowed other members of other teams to access your game files.
3. You will be asked to nominate one team member to receive all emails from the administrators. He/she will
be responsible for relaying the information to all team colleagues.
Executive Operating Instructions

Internet Access to the Software
The nominated member(s) of your team will receive an email containing a team number, a password and a link similar
to :
http://executive.trainingsimulations.co.uk//PlayerLogin/index.php
Click on the link to run the simulation and enter the team password in the relevant box.
The first screen of the exercise will be displayed.
Opening Screen
From the opening screen, there are two main buttons for selection :
1. 'View Market Data', which enables you to view the Cost & Data Sheet for the current round. From
round/year 2 this button will read 'Show Round X Results' and will enable you to view the results from the
previous round and view the current Cost & Data Sheet.
At the beginning of any new decision-making period it is strongly recommended that the results from the
previous year are analysed and used as the starting point for discussions and decisions relating to the current
round/year. The new Cost & Data Sheet will also be needed as prices will have risen with inflation since the
previous year.
The Reports and Cost & Data Sheet can be saved to a file or printed by using the icons on the top right hand
side of the screen.
2. 'Go Straight to Decisions' to begin entering decisions immediately. This option is only likely to be used when
re-entering the simulation after a break from decision making.
Page 37
Other options on this screen :
1. At the bottom of the screen there is the option to view previous round results. From here you can view the
results for any year/round.
2. There is also the option to exchange messages with the simulation administrators by using the message
board.
Entering Decisions
1. To begin entering decisions select the Enter Decisions button, which can be found at the top and the bottom
of the screen.
2. There is a generic help screen on each screen and beside each individual decision box there is a symbol that
gives additional help on that specific element.
3. There is a main category decision box for each model and the company. These can be accessed directly at
any time by using the menu bar on the left hand side of the screens.
4. Each category box has a Status button at the top right hand corner. This will be red and say pending until all
decisions have been entered when it will change to green and say complete. It is not possible to proceed to
the next stage of the simulation until all these boxes are categorized as complete.
5. Once all decisions have been entered select the green Proceed button at the bottom of the screen. You will
then be able to view a set of projected results.
Viewing Projected Results

1. Executive will display a forecast set of results for the round and there is also a drop down menu giving the
option to view any of the results from the previous round/year. The previous or projected results can be
saved to a file or printed by selecting the appropriate icons.
NB: The projected results only give an approximate idea of how the company will perform. When the final
decisions are processed by the master simulation, you will be competing against the rest of the marketplace,
i.e. the other teams in your World, and there will be economic and environmental changes in the real world
that are beyond your control. Therefore, the projections should be taken as a guide only.
2. Once the projected results have been viewed it is possible to return to the main decision-making screens and
change any of the data entered. To do this select the Change Decisions button at the bottom of the screen.
This can be repeated as many times as required, however, from round 2 onwards you might be charged for
each time you re-enter the simulation file. You will be informed of any fee before the decision period
begins. This charge will be shown as professional charges in the Profit and Loss account.
Saving Decisions
To save the decisions and submit for processing select the green Finalise Decisions button at the bottom of the
screen. NB : Once this button has been selected it will NOT be possible to view or make any further changes to the
decisions.
Viewing, Printing And Saving Results

1. From year/round 2 onwards the button below will be displayed at the top left hand side of the opening
screen. It will give access to the results from the previous year/round and the Cost and Data Sheet for the
prevailing year/round.
2. At any time during an exercise the results from previous years/rounds can be viewed by selecting "view
previous round results" at the bottom of the login page.
3. To print or save any report, display it on the screen and use the icons at the top right hand of the screen.
Page 38
VERY IMPORTANT - YOU NEED TO MAKE SURE YOU SAVE FINAL DECISIONS TO SEND THEM TO THE SERVER FOR
PROCESSING IN THE MASTER SIMULATION. IF YOU DO NOT DO THIS WE WILL NOT BE ABLE TO ACCESS YOUR
DECISIONS AND YOU WILL NOT RECEIVE ACCURATE RESULTS FOR THE YEAR.
PLEASE REMEMBER THAT THIS IS NOT A COMPUTER GAME. IT IS A REAL-TIME BUSINESS SIMULATION AND ALONG
WITH YOUR FELLOW TEAMS IN YOUR WORLD YOU ARE CREATING A DYNAMIC AND COMPETITIVE MARKET WHERE
YOUR DECISIONS ARE IMPACTED BY THEIR DECISIONS AND ALSO BY THE BUSINESS EVENTS THAT ARE TAKING PLACE
IN YOUR WORLD. MAKING ROBUST DECISIONS IS MOST IMPORTANT. YOU CANNOT ASSUME THAT THERE IS NO
COMPETITION IN YOUR WORLD AND THAT YOUR TEAM WILL NOT BE IMPACTED BY THE CHANGING MARKET AND
ECONOMIC ENVIRONMENT.
Page 39
APPENDIX IX - FREQUENTLY ASKED QUESTIONS
START UP POSITION
Do we have to make an investment for setting up the first two models?

No. Only the cost of features you put on the car – designs, options, etc.
DESIGNS & OPTIONS
Can we put more than one design and engine on a car?

Yes. In fact the customer needs to have choice. If only one shape and one engine size are offered then you are
limiting your market to those customers who want that particular combination.
How do we calculate the cost of the designs that will be added to a car?
Each car will have one shape/style and one engine.
For cost calculation purposes take the average of the cost of the shapes/styles offered and add the average of the
cost of the engines offered.
Example : A medium car is being offered as a 3/5 door hatch and as an SUV/MPV. There is a choice of a small or a
diesel engine.
The cost calculation in year 1 will be:

Shape : £780 + £1690 = £2470/number of shapes offered(2) = £1235 per car
Engine: £364 + £728 = £1092/number of engines offered (2) = £546 per car
Estimated cost of designs for the model = £1235 + £546 = £1781 per car produced.
How do we calculate the cost of the options for each car?

Buyers will choose the options they wish to add to the car from those that have been offered. Some customers may
choose to add all of the options, some may choose none and some may choose a selection of those available. An
average uptake is 33%. However, if the options offered are all appropriate for the type of car being sold and the
target market then the uptake may be much higher. Conversely, if the options offered are not appropriate for the
type of car sold and do not appeal to the target market then the uptake could be considerably less.
The actual uptake can be judged from the cost of the designs and options on the production report but it cannot be
predicted in advance so for calculation purposes the figure of 33% of the total cost of the options offered should be
used.
Why can some of the options that are included in the "packs" also be added individually?
Example : Park Assist can be offered as a single option or as part of the Driver Assist Safety Pack
They are offered individually and as part of a pack because some buyers may not want to buy the whole pack, just
one element of it. However, the packs offer good value for money and encourage customers to spend more than if
they were just going to choose one option.
RESEARCH & DEVELOPMENT
Once we have chosen to invest in an R&D project, do we have to tick the box again in subsequent years?
Yes, the project box must remain ticked until it is online if the project is to continue. If it is “unchecked” the project
will be cancelled. Once online it does not matter if it is checked or not.
How is the R&D cost calculated?

Each research and development project has a research time and a development time that run consecutively. The
development period only begins once the research period has been completed. The time taken for each phase will be
provided in the support material. The cost of the project is given on the cost and data sheet. This cost will be charged
each year until completion of the project. Note that the cost increases annually with inflation. If the project fails the
charge will stop.
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What does the term "online" mean when it appears on the R&D screen or on the R&D report?
On the R&D reports the term “online” means that the project has been successful and is now a feature of the
model/car. The company will no longer be charged for R&D for this project.
How do you put a research and development project onto more than one model?
Research into a project need only be done once for it to be available for all models produced but the development
phase must be carried out for each model. Therefore the most cost effective way of implementing research and
development is to invest in a project on one model only initially so that only one charge is incurred for the research -
if a project is selected for more than one model, each model will incur a charge.
Once a project is online for one model it can be selected on the appropriate R&D screen for addition to the company’s
other models. In this case, it will only take the number of years for “Development” of the project until it becomes
online for that model as well.
The exception to this rule are projects 1, 2 and 27 for which both the research and development times have to be
carried out for all models.
Why is the charge for R&D on the Cash Flow Statement much higher than the total of the cost of the R&D projects
selected?
The cost of R&D on the Cash Flow Statement includes 50% of any investment made in a new model.
DATA ON COMPETITION
Why is there an asterisk next to some of the sales figures?

The asterisk indicates that although the figure shown is the number of cars that have been sold, the company still has
stock of the model.
PRODUCTION
Why is it saying that our production target cannot be met even though our calculations show that they should?
There are two possible reasons :
1. Productivity levels are lower than average because of unfavourable working conditions
2. You are trying to use too much automation – there has to be one worker for each unit of automation.
We invested £0.75m (for example) in automation but the Market Research document states that we have invested
£1m – why?
If less than a whole figure is invested in automation, the figure will be rounded up to the next million on the Market
Research report. However, the correct amount will show on the Cash Flow Statement.
We have invested in a new model in error can we reverse this?

No, once you have committed to a new model it has to stay as part of the company's plan as the money has already
been invested. However, it can be put on hold by allocating just 100 workers to its production. You will still have to
specify it with regard to designs and price.
KEY PERCEPTION FACTORS
What do the figures in the Key Perception Factor Report mean?

The Key Perception Factors are a weighting out of 10 that indicate the relevance of each design, option and research
and development project to the image of a car. 1 indicates little relevance and 10 indicates maximum relevance. It is
very important that you select designs, options and R&D projects that are in keeping with the type of vehicle you are
trying to market.
Example : If you are selling a car that you are marketing as safe and green, you should give greatest consideration to
options, designs and R&D projects that have a high score in the Safety and Green sectors.
Page 41
APPENDIX X – SUMMARY OF FINANCIAL RATIOS
This paper provides a summary of the financial ratios that are presented by the simulation and defines two that you are required to calculate. In the annual management and financial
report there is a financial indicators summary… so some of the work has been done for you.
Ratio How it is calculated What it means

Gross Profit (Loss) It shows how profitable your sales are before you incur the admin, organizational and professional expenses. In essence
Gross Margin %
Sales Revenue it shows the relationship between the price you charge for your products and the costs in making them
Operating Profit It shows how profitable your sales are after you have taken off all the costs and expenses related to the making of the
Sales Margin %
Sales Revenue cars and the running of the business, but before financial costs and taxation on any profit.
Return on This ratio demonstrates to the shareholders what their return on their investment is in a given period of time. This ratio
Net Profit after Tax
Shareholders Funds is calculated before any dividends are declared from the profits. This ratio sometimes has the term Return on
Shareholders Funds
(ROSF) % Shareholders Equity – ROE)
Return on Capital Operating Profit This ratio shows how well the firm is investing all its capital (shareholders equity and long term debt capital) and
Employed % Total Capital Employed generating a return on the capital. A firm only creates value if it makes a return on its capital in excess of its cost)
This is a measure that determines if the firm has enough liquid (cash) type assets to cover its short-term liabilities.
Current Assets
Current Ratio(times) Current assets are stock, debtors and stock and current liabilities are creditors, unpaid taxation, dividends due and bank
Current Liabilities
overdrafts. A good ratio is between 1.5-2:1 (£1.5-£2 of current assets for each £ of current liabilities)
Net Profit (Loss) after Tax This is a measure of how well the firm uses the investment in its net assets (fixed assets+ investment assets+ current
Return on Assets%
Net Assets assets- current liabilities) to produce a profit. It is a measure of asset efficiency.
This is similar to the current ratio except that it focussed only on those current assets that are considered to be liquid
Current Assets – Stock
Quick Ratio (times) and quickly available to the firm. It therefore removes stock from the calculation. Ideally you need to be in a 1:1 ratio – a
Current Liabilities
balance between liquid type assets and current liabilities
Earnings Per Share – After Tax Profits
This ratio shows the amount that is available for distribution as dividends to the shareholders
EPS (p) No of Shares
This ratio is a measure of value for investors… it shows how long in years it would take to get their money back from the
Price Earnings Ratio Share Price
profits (earnings) of the business if they bought a share at the current price. The lower makes the firm more vulnerable
(PER) Earnings Per Share
to a takeover. The higher the less attractive to income type investors
Total Debt Capital The gearing (or leverage) of a firm is a measure of business risk. It is calculated by relating the long-term borrowings to
Gearing %
Capital Employed the total capital employed and expressing the answer as a % of the capital employed.
Page 42
APPENDIX XI – ATTENDANCE CRITERIA FOR GROUP MARK CREDIT
You must demonstrate adequate attendance during each of the blocks of sessions below to be awarded the group
mark for the assignment indicated. If you are unable to attend due to illness or other reason, you must use the
Department procedure for self-certification of absence or the formal Mitigating Circumstances process.
Session date Assignment

th
Wednesday 7 October
th
Friday 9 October th
th Business Strategy and Brand, due Friday 16 Oct 1300
Wednesday 14 October
th
Friday 16 October
st
rd
Friday 23 October th
th Y1 Management report, due Friday 30 Oct 1300
th
Friday 30 October
th
Wednesday 4 November
th
Friday 6 November th
th Y2 Management report, due Wednesday 11 Nov 1200
th
Friday 13 November
th
th
Friday 20 November th
th Y4 Management report due Friday 27 Nov 1300
th
Friday 27 November
rd
Wednesday 2 December
th
Friday 4 December th
th Poster presentation – Friday 11 Dec
Wednesday 9 December
th
Friday 11 December
Page 43
APPENDIX XII – BIOGRAPHIES OF ENGINEERING ICONS
Without the work of the following engineers and scientists, the world we see today might have been very different!
ARCHIMEDES of SYRACUSE 287 BC – 212 BC
This world name was nominated by the winners of Kwolek World in 2014/15.
Ancient Greek mathematician and inventor who published widely but is perhaps best known for two things. The first
is the method of determining the volume of an irregular shaped object by immersion. This is still used for many
applications, for example determining the density of sintered components to assess the success of the sintering
parameters selected. The second thing that Archimedes is famous for is the Archimedes screw as a method of
pumping water. This invention is also the forerunner of all propellers on ships and aircraft.
LILLIAN MOLLER GILBRETH 1878 – 1972
American industrial psychologist who had a pioneering role in the development of the disciplines now known as cost
engineering and human factors engineering, making signifciant contributions to the efficiency of industrial process
and the design of devices to make them easier for humans to use. She is credited with the invention of the shelves
inside the door of fridges, and the foot-pedal operated rubbish bin!
JAMES CLERK MAXWELL FRS FRSE 1831 – 1879
Scottish mathematical physicist who brought together the theories of magnetism and electricity. Maxwell
demonstrated that electricity and magnetic fields travel through space as waves moving at the speed of light. He is
also partially responsible for development of the Maxwell-Boltzmann distribution. These developments are
fundamental to the field of electrical, electronic and communications engineering.
This world name was nominated by the winners of Cray world in 2014/15.
EMILY WARREN ROEBLING 1843 – 1903
An American Civil Engineer, she was effectively the Chief Engineer of the world famous Brooklyn Bridge, taking over
from her husband when he fell ill. She taught herself the technical knowledge required to complete an enormously
complex and advanced project (in an era where all the structural loadings and response had to calculated by hand!)
whilst managing the day-to-day activities on site. A competing engineer, Abram Hewitt, described the bridge as "an
everlasting monument to the self-sacrificing devotion of a woman and of her capacity for that higher education from
which she has been too long disbarred."
In previous years, the Worlds were named after the following Science and Engineering icons:
2011/2012: 2012/2013: 2013/2014: 2014/15:

Isambard Kingdom Rudolph Diesel Neil Armstrong Seymour Cray
Brunel FRS
Sir Alec Issigonis FRS Charles Babbage FRS Stephanie Kwolek
Michael Faraday FRS
Nikolaus Otto Adrian Newey OBE Ada Lovelace
Sir Frank Whittle FRS
George Stephenson Alan Turing OBE FRS Wilbur & Orville Leonardo da Vinci
Wright
Page 44

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Department of Engineering

EG2017: Business Simulation 2015/16

Student Briefing Paper and Simulation Guidelines

Driving the learning experience …

APPENDIX I - THE EXECUTIVE BUSINESS SIMULATION - MANAGEMENT TEAM ROLES .............................................. 17

 your team structure and responsibilities

After completing the simulation exercise you should be able to:

3 THE SIMULATION ACTIVITY

 Establish and name your own company

Date Event Time Commentary

Tuesday Complete individual Final deadline for completing Individual Assignment on

Oct Group working session

Prepare Management Report for year 2 trading. Begin

Wed Review results of Y3 (no formal management report required

12.00 business performance review and poster.

10.00- Preparing group learning review and completing the peer

5.2 Business Strategy and Branding

 The name of your company, its logo and strap line

5.3 Access to the Simulation File

5.4 Annual Management Report and Business Performance Review

 Business results for current and prior year covering:

5.5 Group Learning Review

5.6 Poster Presentation – Friday 11th December

Individual Assignment on Financial terms 25%

1. Attendance contributing to specific assignments

2. Overall weighting factor and group effort survey

6 BUSINESS SIMULATION PARAMETERS

World World Name

6.1 Market Dynamics

6.2 The Starting Position

6.3 The Financial and Economic Environment

6.4 The Marketplace

6.5 Product Design and Options

6.6 Research and Development

R&D projects are divided into two phases :

Redundancy payment is 12 weeks salary.

A working year is 50 weeks.

Type of Promotion Cost per unit (£m)

6.11 Market and Competition Research

factory/tooling: £650 million

Extra funding can be raised by borrowing money from the bank.

Interest on loans will be charged as follows :

negotiated loan : 5 + inflation

10% x wage bill +

Average days are:

CHIEF EXECUTIVE OFFICER

STRATEGIC PLANNING EXECUTIVE

TECHNICAL AND ENGINEERING EXECUTIVE

SALES AND DEALER NETWORK EXECUTIVE

Exercise Name Team Number Round/Year

Target Age Group

Designs Offered (1-10)

Remove Designs (1-10)

Options Offered (1-30)

Remove Options (1-30)

R&D Projects in Progress

Cancel R&D Projects

Retail Price (£)

Automation (£m) Skills Training £m

Wage (£/week) Management Training £m

Promotional Expenditure (£m)

New Model Investment (£m)